Watanabe Mariko, Professor, Gakushuin University   Key points Deng Xiaoping achieved rapid growth by destroying vested interests The current administration prioritizes national security at the expense of openness to the outside The strategy increases burden against their own costs   The National Congress of the Chinese Communist Party is held in China this autumn. The future course of the Chinese economy will depend on the choices made by China’s political and economic systems. This article provides a bird’s-eye view while referencing the discussion about the relationships between economic growth, institutions, and technology choices in a political economy. ◇　　　◇ China is the world’s second largest economic power, but GDP per capita has still not reached the levels of developed countries. According to economic growth theory, if a country has the same institutional environment [as developed countries], the lower the income level of the ... ... [Read more]

    Makino Kuniaki, Professor, Keio University   Key points Emphasis on international division of labor rather than securing colonies Lofty Anglo-American ideals severely criticized as deception in Japan Demonstrate benefits of liberalization to avoid a crisis in the international order   Ishibashi Tanzan (1884–1973), the economist who played a role in the gold embargo controversy in the early Showa period, turned to politics after the war and became prime minister. He is known for his criticism of the “great Japanism” that aimed to acquire colonies in the Taisho period (1912–1926) and for championing the so-called “little Japanism.” The ideas that Ishibashi developed based on his research of classical economics in Britain, including Adam Smith and David Ricardo, provided the context for his arguments. According to Ishibashi, the source of wealth is found in labor and the economy is based on the division of ... ... [Read more]

  KOBAYASHI Keiichiro, Program Director and Faculty Fellow, Research Institute of Economy, Trade and Industry (RIETI) Global Inflation and Inflation in Japan The current global inflation apparently has aspects of both “cost-push inflation,” which is attributable to supply-side factors such as the worldwide supply chain disruptions due to the COVID-19 crisis and constraints on resources and energy due to the Ukraine situation, and an “inflation spiral,” in which a wage upsurge caused by a labor shortage and general price increases mutually amplify each other. If such a self-perpetuating inflation spiral accelerates, eventually, the kind of hyperinflation that frequently strikes developing countries could be triggered due to the loss of public confidence in currencies. Therefore, governments around the world are trying to hold down the ongoing inflation by slowing down economic activity through rapid monetary tightening. The situation in Japan is not an inflation spiral ... ... [Read more]

  Mukunoki Hiroshi, Professor, Gakushuin University   Key points Doubts over the effectiveness of any rules or agreement reached under the IPEF Expectations for the IPEF as a bridge connecting different cooperation frameworks Opportunity for discussion of export restrictions, which existing trade agreements leave untouched   With the global economy facing a myriad of risks and with the emphasis being put on economic security, the Indo-Pacific Economic Framework (IPEF) is attracting attention as a new opportunity for international economic cooperation among nations. The IPEF was proposed by President Biden in May. It is a mechanism to build international cooperation, focusing on four pillars: trade; supply chains; clean energy, decarbonization and infrastructure; tax and anti-corruption. Fourteen countries, including Japan, South Korea, India, as well as countries from Southeast Asia and Oceania, have agreed to join (see Table). Whilst the United States has seen its presence in the international ... ... [Read more]

  Shiratori Junichiro, Associate Professor, The Open University of Japan   One of the characteristics of international politics in the 21st century is that the global interdependence of heterogenous states is becoming normalized. With the US-China conflict and the Russian invasion of Ukraine, there are indications of globalization coming to an end, but even if globalization were to stagnate, we still have to consider the current situation of this global interdependence of heterogenous states. EU countries and Japan are dependent on imported energy resources, and superpower Russia’s needs to export its natural resources to cover its war expenditures is a structural situation. Moreover, unlike oil, for which the global market is fairly organized, it is not easy to find new places for importing natural gas. Because of the Russian invasion of Ukraine, chaos in the energy markets is likely to persist for years. This ... ... [Read more]

  Kumagai Satoru, Director, Economic Geography Studies Group, Development Studies Center, Institute of Developing Economies, Japan External Trade Organization (JETRO)   Key points Without Chinese participation, the effectiveness of sanctions against Russia will be limited After the Cold War, supply chains expanded beyond the confines of East-West, North-South Questions raised about business partners’ aspects of economic security, environment, and ethics   Three months have passed since the Russian invasion of Ukraine began. While the North Atlantic Treaty Organization (NATO) camp has shown no signs of intervening militarily, Japan, the United States, and European countries have removed Russian banks from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) and frozen the assets of Russian dignitaries. They have imposed economic sanctions, including export bans on certain commodities to Russia. If economic sanctions against Russia are made more stringent, what will the impact be on Russia and ... ... [Read more]

  Kawaguchi Daiji, Faculty Fellow, Program Director, Research Institute of Economy, Trade and Industry (RIETI), Professor, Graduate School of Public Policy and Graduate School of Economics, University of Tokyo   At the May 20 meeting of the “Council for the Realization of the New Form of Capitalism,” it became clear that the direction of the proposal is to place investment in people at the core of its recommendations. Two points need to be further discussed in the compilation of concrete measures. The first point is how workers’ skills are formed. In particular, since workers’ skills are formed through both schooling and training in the workplace, it is necessary to examine how each plays a role in forming such skills. Let us take the example of the training of information technology (IT) engineers, who are in short supply. The meeting memo points out the need ... ... [Read more]

  Iida Yasuyuki, Professor, Meiji University Changing politics, society and security and the impact on the world economy What is the biggest economic risk that Japan will face as a consequence of Russia’s invasion of Ukraine? It is neither soaring energy prices nor inflation. It is the warping of decision-making on economic policy because of too much attention being paid to the huge changes in the international situation. News outlets file reports on devastated cities, countless victims and barbarous acts by the Russian military on a daily basis. The Ukrainian population is about 42 million (Russia about 147 million). The country’s GDP per capita is only about $3,700 (Russia’s is about $10,000), which really is not much at all, but the fact that a modern state in a corner of Europe has been hit with an all-out invasion will surely bring about large and ... ... [Read more]

Komine Takao, Professor, Taisho University   Key points Evaluating the value of the yen from an export sector and producer perspective Energy prices were stable when the yen depreciated in 2013 Aim to support yen appreciation on the back of enhanced economic strength   The depreciating yen together with the rise in imported energy prices has caused import prices to rise, with the ripple effect of a rise in domestic prices. In response, the “bad yen depreciation theory,” which holds that the weak yen will have a negative impact on the Japanese economy, has surfaced. This represents a significant departure from the dominant long-held notion in Japan that a weak yen is good news and a strong yen is bad news for the economy. This situation can be attributed to several factors. I begin with an overview of the economic impact of a weak ... ... [Read more]

Kawashima Fujio, Professor, Kobe University   Key points The Asia-Pacific as a main battleground for digital trade The US and China fighting for control over the rules Japan ought to actively participate in rule-making as a matter of national interest   The United States and China are engaged in fierce fighting for control over rule-making on digital trade in the Asia-Pacific region. In September and November 2021, China applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) which has an advanced chapter on electronic commerce and the Digital Economy Partnership Agreement (DEPA). By contrast, in October, the United States announced that they would start building the Indo-Pacific Economic Framework (IPEF) in 2022. Moreover, in January 2022, the Regional Comprehensive Economic Partnership Agreement (RCEP) for East Asia, which also has a chapter on electronic commerce, entered into force among Japan, China, and ... ... [Read more]