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No.46
Economy ,No.46  May 01, 2018

Stalled Fiscal Consolidation:
Private-Sector Financial Asset Surplus is Key

Key points: Private sector financial surplus can offset government financial deficit Domestic liquidity may be tight in second half of 2020s Long-term interest rates could rise before deficit in current account At a meeting of the Council on Economic and Fiscal Policy last January 23, the Cabinet Office announced its “Economic and Fiscal Projections for Medium to Long Term Analysis.” The projections show that, even if economic growth is achieved as targeted under its growth scenario, the government now projects that a surplus will not be achieved in the central and local government primary balance until the fiscal year ending March, 2028, or two years later than the last projection made in July, 2017. Debt repayment will be limited since a portion of the increased revenue from the October 2019 consumption tax hike will be allocated to childcare support, and total factor productivity (representing ... ... [Read more]

No.46
Economy ,No.46  Apr 06, 2018

Blueprint for the Future of Social Welfare (II) : Limiting State Responsibility to the Guaranteed Minimum

Key Points Japan has lagged behind in terms of human investment because of excessively expanded social insurance. Low-income earners are disadvantaged in terms of the social insurance burden and benefits. Reforms are needed that require middle- and high-income earners to make self-help efforts. The government has published the “New Economic Policy Package”, and drafted the fiscal 2018 Budget  including annual tax reforms, with human resource development as the central pillar. I do not object to this direction, but there has been little analysis and verification of problems in the existing system based on data and evidence. The burden will be forced on children who lack voting rights if the budget deficit increases to improve childcare and education. In this article, I will discuss the tasks and remedies for overcoming the declining birthrate and aging population. Human capital investment is a common issue in advanced ... ... [Read more]

No.46
Economy ,No.46  Apr 06, 2018

Blueprint for the Future of Social Welfare (I) : Social Security Cutting Across Policies, Public Finance and Employment

Key Points Policy switches in multiple fields have become an issue in advanced countries. The conversion of Japan’s social security systems to whole-generation social security produced results of a certain level. A future vision for a society to aim for should be clarified. The administration headed by Prime Minister Abe Shinzo has advanced support for women’s employment and working style reforms since 2015 under its slogan of promoting the dynamic engagement of all citizens. In December 2017, the Abe cabinet decided on a package of new economic policies and announced new measures for assisting with childcare and education in the name of human resources development in addition to measures collectively referred to as a productivity revolution. An outline of these measures is provided below. As measures for supporting childcare, the government will uniformly dispense with fees for using authorized facilities, such as kindergartens and ... ... [Read more]

No.45
No.45 ,Economy  Mar 29, 2018

ICO: Dream or Nightmare?

The rise of digital currencies, including Bitcoin, causes us to predict the arrival of a new era. This is because the technology of blockchain, which constitutes the foundation of many digital currencies, is likely to prompt the emergence of completely new systems for investments and settlements of capital. However, it is undeniable that many of these systems still involve problems. Particularly alarming is capital procurement known as Initial Coin Offering (ICO), which uses the function of digital currencies called Ethereum. I will not provide a detailed explanation of what ICO is. But suppose that there is an imaginary ledger that is shared on the Internet using blockchain technology, and that the relationships of many rights and contract items are described there. Suppose that the rights corresponding to currencies are written there. In this situation, it would be possible to automatically move currency-based values in ... ... [Read more]

No.45
No.45 ,Economy  Mar 29, 2018

Stalled Fiscal Consolidation: Government Must
Act Soon on Policy Normalization

Key Points Japanese economy: Likely to slump after Tokyo Olympics Emergency Measures: Continuing through 2020s not possible Healthcare Insurance: Adopt funded individual savings account system This autumn Prime Minister Abe Shinzo is expected to decide whether or not to proceed with the 10% hike in the consumption tax rate, which is scheduled for October, 2019. During the House of Representatives election held in October of last year, the ruling party promised to allocate a portion of the revenue increase from the consumption tax hike to educational expenses, as by strengthening preschool education. Originally, 80% of the revenue increase was supposed to be allocated to paying down debt. But that would not benefit the younger working generation, and yet cutting social security spending to fund preschool education would be opposed by the elderly, so that’s not an option either. The government has secured a funding ... ... [Read more]

No.45
No.45 ,Economy  Mar 29, 2018

Challenges after the TPP-11 agreement: A guide towards establishing global rules

Prof. Kimura Fukunari

Key Points TPP-11 is a great achievement in Japanese economic diplomacy “Frozen” items will not detract from the quality of the agreement Move towards data localization should be restrained In November, a new broad agreement based on the Trans-Pacific Partnership (TPP) was reached between 11 countries, excluding the US, in Da Nang, Vietnam. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP, or TPP-11) represents a major step towards putting the TPP into practice. Four points were listed as requiring further negotiation. They were on state-owned companies (Malaysia), services and investment in the coal industry (Brunei), dispute settlement (Vietnam), and cultural exceptions (Canada). Once these points have been agreed and signed off however, the agreement will be ratified by at least six countries, irrespective of their economic scale. With the US currently distancing itself from the TPP under the Trump Administration, some have claimed ... ... [Read more]

No.45
No.45 ,Economy  Mar 29, 2018

Focus of Japan-U.S. Economic Dialogue (III)
Shifting Towards a Primary Focus on Reinforcing the
WTO: Japan Should Reject Results-Oriented U.S.
Demands

Key Points Japan should pursue common Japan-U.S. interests, with an eye towards China Bilateral negotiations over Japan-U.S. free trade agreements (FTAs) have effectively already begun Japan should collaborate with Australia and European states in the formation of a free trade coalition The Japan-U.S. Economic Dialogue was launched during U.S. Vice President Mike Pence’s upcoming visit to Japan in April, 2017. In addition to affirming the success of the Japan-U.S. summit meeting in February, the Dialogue is also an attempt to contain and manage the various criticisms made by President Donald J. Trump. This is common practice in managing Japan-U.S. economic relations, and similar methods have been employed in the past; such as in the Comprehensive Economic Talks held under the Clinton administration, and the Vice-Ministerial Level Economic Dialogue held under the Bush administration. (Please refer to the table.) In order to avoid accidental outbreaks ... ... [Read more]

No.45
No.45 ,Economy  Mar 29, 2018

Focus of Japan-U.S. Economic Dialogue (II)
Japan as a Bridge Between the U.S. and East Asia: Perspective on a framework for discussion which includes China

Mr. Tanaka Hitoshi

Key Points The economic-security nexus in U.S.-Japan relations is irrational. The TPP should be ratified in the other 11 member countries, and the door left open for U.S. participation. Japan should lead RCEP and Japan-China-South Korea FTA negotiations.   U.S. Vice President Mike Pense will visit Japan to work with Japan’s Deputy Prime Minister Aso Taro on a new Japan-U.S. Economic Dialogue based on consensus reached in the Japan-U.S. summit meeting.   In the 1980s, at the time of severe economic frictions between the U.S. and Japan under President Reagan’s Republican administration, I conducted negotiations with the U.S. as a member of Japan’s Foreign Ministry. I would like to examine the implications (of the upcoming negotiations) for Japan’s foreign relations and economy, comparing the situation now with the situation then.   First, the U.S. trade deficit itself has expanded from 50 billion dollars in the early ... ... [Read more]

No.45
No.45 ,Economy  Mar 29, 2018

Focus of Japan-U.S. Economic Dialogue (I)
Japan Should Pull the U.S. Away from
Protectionism: Exploring the possibility of FTA
negotiations

Key Points The most alarming course of action the U.S. could take is unilateral action. Japan should stress that it is pointless for the U.S. to see its trade balance with Japan as a problem. Japan should constantly push for liberalization negotiations to maintain the trading system. A Japan-U.S. Economic Dialogue, led by U.S. Vice President Mike Pense and Japan’s Deputy Prime Minister Aso Taro, is scheduled to be held in Tokyo on April 18. Since this is the first meeting in this new dialogue, there may be no in-depth discussion on individual problems. However, given that the Trump administration continues to make remarks about protectionism, it will be interesting to see how discussions on the yen-dollar exchange rate and commerce-related problems unfold.     On March 31, 2017, President Trump signed a Presidential Executive Order aimed at reducing the U.S. trade deficit. The U.S. ... ... [Read more]

No.45
No.45 ,Economy  Mar 23, 2018

A Strategy for Accepting Foreign Workers
for A Sustainable Society

It is important to take a long-term perspective instead of merely accepting foreigners to compensate for the shortage of human resources. How should foreigners be accepted to sustain the declining population? In addition, even if the doors are open, excellent foreigners might not come. It is important to create an attractive environment.   Recently, we often see that many foreigners are working in the manufacturing, service and retail industries. According to the registrations for the employment of foreigners by the Ministry of Health, Labour and Welfare, there were 1.08 million foreign workers at the end of October 2016, exceeding one million for the first time. In addition, according to the statistics on foreign residents in Japan published by the Ministry of Justice at the end of December 2016, there were 2.38 million foreign residents in Japan, showing a tendency to increase. Expectations for foreign ... ... [Read more]

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