A world-ranking economic power with the foreign-exchange rules of a developing nation. For years this is how American and European critics have described the unwiedly set of regulations that have given Japanese government bureaucrats enormous powers over the flow of money in and out of the country.
In the first major change in decades, however, a new foreign-exchange law went into effect Dec. 1 which, in theory at least, means all controls have been lifted.
In fact, after years of wrangling, the Finance Ministry has agreed to the relaxation of controls only on the understanding that it reserves the right to block anything it deems will cause "turbulent" foreign-exchange rate fluctuations and serious abnormalities in the nation's balance of payments.
The ministry has refused to spell out its emergency powers, and the law itself is phrased in a suitably vague manner that allows for the sort of flexibility Japanese bureaucrats like to maintain control.
Even so, the new law is a major step forward in simplifying many capital and trade transactions.
For the first time since the Pacific war, Japanese citizens, regarded as the world's greatest savers, will be freed from a 3 million yen (around $14,000) limit on foreign currency (which, in effect means dollar) deposits.
Corporate, foreign trade, and external transactions have long been exempt from this limit.
Monetary officials cite this change as the most liberalizing aspect of the new law.
Unlike normal yen-based accounts, banks use Eurodollar rates for setting the interest on foreign-currency deposits. These rates currently stand at 16 percent per annum, far more than yen deposits can yield even after the payment of commission and taxes on the former.
Many smaller and local banks are now worried that they will lose business to the major banks which also deal in foreign-currency transactions.
There are estimates that the new dollar deposit program, protected somewhat by forward coverage, could attract several billion dollars in new deposits. The Bank of Japan has already issued a strong warning against excessive competition for new dollar deposits, and it will require commercial banks to report daily on new foreign-currency deposits to monitor the trend.
But monetary experts don't believe the relaxation will get out of hand and certainly will have little impact on the yen-dollar exchange rate, which has now become relatively stable.
for foreign investors the most significant change is an easing of rules to allow them to acquire an unlimited number of shares in most Japanese companies. The old rule was a 25 percent limit on foreign ownership and a 10 percent maximum for any foreign individual.
This will be maintained for only a handful of designated companies in the energy and defense industrial sector.
Security firms are delighted with the change, which occurs at a time when overseas interest in Japan's resilient economic performance has been reflected by massive buying of shares and bonds on the main stock markets here.
However, the government is already uneasy about the fact that some local oil companies are already half foreign owned, and security sources believe there will soon be official moves giving blanket protection to strategic areas such as public utilities, banks, transportation companies, and steel mills to prevent them from falling into alien hands.
The law also will get rid of much of the bulky paper work that has always made trading with Japan a frustrating business. For instance, the government will no longer have to be advised of every import and export contract.
Other areas of liberalization include the induction of untied foreign-currency loans without restriction and provisions for allowing nonresidents to acquire fixed properties for leasing.
A Finance Ministry official said the new law should silence foreign criticisms of the Japanese govenment's past over-protectiveness of its economy.
But in addition, he said, "It should not be overlooked that the ordinary Japanese man in the street will now have a chance to take advantage of a more liberal investment attitude in areas that were previously the sole preserve of major corporate investors and traders."