Shirai Sayuri, Professor, Keio Universit   Key points Governments should promote measures to develop green finance Governments should support environmental projects by actively issuing green bonds The Bank of Japan should make greater contributions to climate issues through purchasing green corporate bonds and Exchange Traded Funds (ETF)   Green finance that supports improvements in environmental issues has drawn attention in recent years. To limit the global average rise in temperature to 1.5 degrees by the end of this century as compared to pre-industrial levels, a large amount of capital spending and R&D is needed to reduce greenhouse gas (GHG) emissions to net zero by 2050. According to an estimate by the International Energy Agency (IEA), more than double the current annual global investments (550 trillion JPY) will be needed by 2030 and around the same amount will be needed until 2050. Europe is leading ... ... [Read more]

Tsuru Kotaro, Program Director and Faculty Fellow, Research Institute of Economy, Trade and Industry (RIETI)   Despite the progress in vaccination, the COVID-19 pandemic continues to rage on. Following the issuance of the fourth declaration of a state of emergency, the government has frequently called for companies to reduce the number of commuting workers by 70%, but there has been little progress in the effort to reduce the flow of commuters. Looking back at the pre-pandemic status of teleworking arrangements, including working from home, although large and listed firms were accelerating the teleworking schemes, the number of people actually working from home continued to be low. Under the COVID-19 crisis, particularly since the issuance of the first declaration of a state of emergency in April 2020, the percentage of employees working from home (telework rate) has risen rapidly (see Figure 1). According to various ... ... [Read more]

Morinobu Shigeki, Senior Research Fellow, The Tokyo Foundation for Policy Research   Key points EU considers tax to collect the difference in carbon prices A carbon tax on emissions is simple and straightforward Use of carbon tax revenues should take into account growth strategy   On July 14, the European Commission (EC) announced its intention to introduce a carbon border adjustment mechanism (CBAM). The CBAM will apply the European Union Emissions Trading System (EU ETS) to imports of specific products to regulate greenhouse gas emissions in imported products, in order to prevent “carbon leakage,” whereby EU companies shift production bases to countries with less stringent carbon regulations. Full-scale introduction of the mechanism is planned from 2026 for five products: cement, electricity, fertilizers, steel and aluminum. Under the new mechanism, importers will have to purchase certificates to cover their CO2 emission per ton in accordance ... ... [Read more]

Maeda Yudai, Executive Editor-in-Chief of EnergyShift The Skyrocketing Greenhouse Gas Reduction Target The global wave of “decarbonization” has already descended upon Japan, and this has led to a great change in that direction. On April 22–23, the Leaders Summit on Climate hosted by the United States was held online after President Biden called for the summit, and there, Prime Minister Suga declared that Japan aims to reduce its greenhouse gas emissions by 46% in fiscal year 2030 from its fiscal year 2013 levels. The original goal was for a 26% reduction, so this number was close to double the original goal. FY 2013 levels are used as reference for these reduction goals, and Japan is already progressing well with energy conservation compared to the rest of the world. I get the sense that energy conservation is quite strict among the population, and industry may ... ... [Read more]

Takeo Hoshi, Professor, University of Tokyo   Key points Staying afloat with support despite no hope for performance recovery Hurting the profitability of healthy firms and the economy as a whole Urgent need for policy shift to protect employment rather than firms   When the main character Barbara and her brother visit their father’s grave in the cemetery, an unknown man approaches them with clumsy steps from afar. This is the first scene where a zombie appears in the Night of the Living Dead (1968), which is credited with inventing the zombie movie genre. There are firms that perform badly and have little hope of recovery but that are kept afloat with support from creditors and the government, negatively affecting other firms and stagnating the economy. Likening this to zombie movies, Ricardo J. Caballero, Professor at Massachusetts Institute of Technology, and Anil K. Kashyap, ... ... [Read more]

Ida Takanori, Professor at the Graduate School of Economics, Kyoto University   Key points The pessimism bias is stronger in Japanese people than in British people People who have pessimism bias understand the need for self-restraint Education needs to target young men and other groups at high risk of infection   More than a year since the outbreak of the pandemic, the COVID-19 catastrophe has still not abated. Coronavirus is not the only thing that has become prevalent. The academic term “behavior change,” used in the behavioral sciences, has unexpectedly come into widespread use. Behavioral economics considers human rationality to be limited and cognition to be subject to biases, placing emphasis on “nudge” as a means of changing behavior for the better. A declaration of a state of emergency issued in some areas on April 7, 2020, asked citizens to refrain from leaving the ... ... [Read more]

Tomiura Eiichi, Faculty Fellow and Program Director at the Research Institute of Economy, Trade and Industry (RIETI), Professor at the Faculty of Economics, Hitotsubashi University   It is difficult to grasp the whole picture of a cross-border supply chain based on publicly available statistics. However, according to a list of suppliers (e.g., parts manufacturers) disclosed by Apple Inc., for example, the supply chain for the company’s products extends across as many as 30 countries/regions. In addition to “snake”-type supply chains, under which long lines of production processes are located across many countries, there are “spider”-type ones, under which intermediate goods are collected from suppliers in many countries. This classification of supply chains was proposed by Richard Baldwin of the Graduate Institute of International Studies, Geneva, and Anthony Venables of Oxford University in the United Kingdom. Many countries have enjoyed the merits of combining the ... ... [Read more]

Kikkawa Takeo, Vice President, Professor, Graduate School of International Management, International University of Japan   The confusion caused by the new reduction targets Prime Minister Suga Yoshihide announced a policy of realizing carbon neutrality and reducing Japanese greenhouse gas emissions to a “net zero” by 2050 in his policy speech immediately after his inauguration on October 26, 2020. He also presented the target of reducing greenhouse gas emissions by 46% by FY2030 compared with FY2013 at the Leaders Summit on Climate, hosted by US President Joseph R. Biden, Jr. on April 22, 2021. This new target of a 46% reduction is a considerable upward adjustment of the previous target. At COP21 (The 21st Conference of the Parties to the United Nations Framework Convention on Climate Change), which adopted the Paris Agreement in 2015, the Japanese government made the international commitment to “reduce greenhouse gas ... ... [Read more]

Okina Yuri, Executive Vice President, Nippon Institute for Research Advancement (NIRA), Chairperson, The Japan Research Institute, Limited   Abstract In 2020, the world economy was struck by the unprecedented crisis of the COVID-19 pandemic. Japan’s response to the pandemic has been comparatively successful when considered from an international perspective, and has reduced the nation’s mortality rate. At the same time, it must be said that it has also highlighted serious structural issues in Japanese society. Based on an international comparison, the most important issues to be addressed can be seen to include comprehensive review of the system of medical care and the cultivation of readiness for emergency responses. In addition, the important issues from the perspective of ensuring economic security are the enhancement of vaccine development, flexible responses with regard to the various regulations associated with vaccination, and focused and flexible government expenditure with ... ... [Read more]

Kojima Akira, Member, Board of Trustees, and Adjunct Professor, National Graduate Institute for Policy Studies (GRIPS)   The Novel Coronavirus (COVID-19) was detected in Wuhan, Hubei Province, China at the end of December 2019. In January 2020, cases of infections were confirmed in Japan, and the pandemic intensified as the infection spread rapidly around the world. The subsequent Great Lockdown, to quote the International Monetary Fund (IMF), has plunged the global economy into the worst recession since the Great Depression in the 1930s, creating disparities between countries, types of industry, and social classes. In 2020, the growth rate for the global economy slumped to negative 3.3%. The widening disparity has also drawn attention to how economies and societies have started to develop in the shape of a K, i.e., polarizing into areas of growth and expansion, and areas of downturn and decline. The coronavirus ... ... [Read more]