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Jan-Feb 2014

No.18 ,Economy  Feb 04, 2014

New Developments in the Agricultural Business
Abolishing the policy to reduce rice production is the first step toward a national economy based on agriculture: Toward agricultural innovation and business creation

YAMASHITA Kazuhito, Research Director, Canon Institute for Global Studies

Inaccurate perceptions about agriculture With respect to agriculture, there is the common perception that large-scale farmers run their modern agricultural operations by using a lot of fertilizer and chemicals, while poor small farmers engage in environmentally friendly agriculture, and that Japan can’t compete with agriculture in the United States and Australia due to its small land area and the scale of its agricultural operations. The agricultural industry and certain experts claim that this is why Japan’s agriculture, especially its small farmers, must be protected, and that expanding the scale of farming operations to improve efficiency or for Japan to join the Trans-Pacific Partnership (TPP) is out of the question. ... [Read more]

No.18 ,Culture
Jan 30, 2014

WASHOKU, traditional dietary cultures of the Japanese

A traditional ichiju-sansai Japanese meal featuring steamed rice and miso soup (front), three main dishes (two vegetable dishes and one of fish), and pickles (top left) All photos: Courtesy of Professor KUMAKURA ISAO

Traditional Japanese food is collectively known as washoku. Under the title, “Washoku, traditional dietary cultures of the Japanese,” the United Nations Educational, Scientific and Cultural Organization (UNESCO) registered washoku on its Representative List of Intangible Cultural Heritage of Humanity on December 4, 2013. Discuss Japan spoke with Kumakura Isao who spearheaded the campaign for convincing UNESCO to add washoku to its intangible cultural heritage list.... [Read more]

No.18 ,Economy
Jan 22, 2014

Conditions for Wage Increases:
Conditions for Wage Increases: Productivity improvement alone is not enough
Need to keep the country’s manufacturing business cluster inside the country and to restrain trading losses

FUKAO Kyoji, Director General, Institute of Economic Research, Hitotsubashi University

Prime Minister Shinzo Abe and his administration are actively encouraging businesses to raise wages. But are wage increases really possible, judging from the productivity trends? And, if so, then what are the necessary conditions? A nation's labor productivity is measured by the real gross domestic product (GDP) generated per hour of labor. Of the real GDP per hour of labor (e.g. 5,000 yen per hour), the real labor cost per hour (e.g. 3,000 yen per hour) is distributed to labor. Therefore, in simplified terms, if the rate of increase in real wages exceeds that in labor productivity, labor share (60% in this example) should increase. If labor share continues to grow, return on capital will fall and capital investment will decrease. Thus, such a wage increase is unsustainable. This is the key reason why we should look at the current state of labor productivity, in order to assess the impact of wage increases.... [Read more]

No.18 ,Economy
Jan 21, 2014

Conditions for Wage Increases: Close consultation between labor and management For important economic strategy Need to maintain close watch over impact on employment

Since the beginning of this year, Prime Minister Abe Shinzo has actively sought wage increases for employees in the industrial sector. Wage levels in Japan are continuing to stagnate, resulting in weaker buying power for households (see the graph). The logic behind the demand for a wage increase is that a rise in wage levels would revitalize consumption, which accounts for about sixty percent of GDP, and facilitate a break with deflation. As a result, some corporations raised wages at the negotiations between labor and management in the spring of this year, but there was hardly any reaction in the wage levels of the economy as a whole. According to the Monthly Labour Survey by the Ministry of Health, Labour and Welfare, the rate of increase for total cash wages at businesses with at least five employees did not exceed 0.6% in June this year (compared to the same month last year), and was almost entirely due to bonuses. Moreover, in July–August, there was a negative increase. ... [Read more]

No.18 ,Economy
Jan 21, 2014

Hope for a Wage Increase

At the Government-Labor-Management Meeting held in the Prime Minister’s office on October 17, representatives from two leading Japanese companies—namely, President Toyoda Akio of Toyota Motor Corporation and Chairman Kawamura Takashi of Hitachi, Ltd.—expressed their positive views toward a wage increase. Prime Minister Abe Shinzo responded to this by saying, “We have heard very encouraging news.” Several years ago, or even just a year ago, there weren’t many people who thought that a wage increase would be a real possibility. I’m probably not the only one who feels that this trend has changed. ... [Read more]

No.18 ,Economy
Jan 21, 2014

Japan is a buy The Abe Administration Should Ease The Impact of The Tax Hike — The key to reviving the Japanese economy is to reduce corporate taxes

In late August 2013, Japanese interest was focused on whether the Abe administration would raise the consumption tax as planned. The government invited sixty experts to the prime minister’s office and interviewed them regarding the pros and cons of a consumption tax hike and the necessary policies associated with the tax hike. The second intensive review meeting on August 27, which I participated in and that the mass media called “a showdown,” attracted attention, as four experts who were opposed to a consumption tax hike, led by Hamada Koichi, Tuntex Professor Emeritus at Yale University and a special advisor to the Cabinet, and five experts including me who supported a consumption tax hike, seriously discussed the issue. The minutes of the meeting are posted on the website of the Cabinet Secretariat, and I would imagine that many people have already read them. At the meeting, I pointed out that there are two myths regarding the previous consumption tax hike (in 1997). The first myth is that the slowdown in the economy was mainly due to the consumption tax hike.... [Read more]

No.18 ,Politics
Jan 21, 2014

Concerns over Abenomics Regarding Projects to “Build National Resilience”
Increasing Government Spending Again Will Do Little to Solve Anything

Japan’s regional areas are currently suffering from a declining economy, while the phenomenon of underpopulation is making matters even worse in those areas. One possible solution that has been presented to solve this problem calls for increasing public works spending, supported by the idea of “Building National Resilience.” This government strategy, however, which aims to revitalize regional communities through the help of large-scale infrastructure investment, appears to be going against the long-time social trend, and I am concerned that it will have the opposite effect and end up hampering the emerging community-driven initiatives to revive the economy and business in those regions.... [Read more]

No.18 ,Politics
Jan 20, 2014

Establish National Targets to Halt Population Decline Follow France’s Example and Stabilize Population at 90 Million *1

Japan is likely to tip into fiscal collapse due to rising tax and social security burdens in the future, or Japan’s standard of living is likely to erode. At the root of the problem lies population decline. If no action is taken, the population will shrink to 30% of its present size in 100 years and to around 10% of its current size in 200 years, and Japan’s presence in the international community will gradually diminish. To avoid such a situation, the Japan Center for Economic Research proposes the establishment of national population targets, aimed at raising the birthrate over the course of forty years and maintaining a stable population of 90 million. We propose combining this with a policy of opening up Japan and inviting people, expertise and investment from overseas. ... [Read more]

No.18 ,Politics
Jan 20, 2014

The Death of Regional Cities: A horrendous simulation Regional Cities Will Disappear by 2040 A Polarized Society will Emerge

The first thing that we need to understand when envisioning the future of a nation is its demographics. Japan, whose population began to decline in 2008, will become a society with a population in full-scale decline. In considering methods to realize an affluent society in such a scenario, it is necessary to look squarely at Japan’s current situation. During my twelve years in office as the governor of Iwate Prefecture, my greatest issue of concern was the declining population and the resulting issue of marginal settlements. When I took office in 1995, the population in Iwate stood at 1,419,000. It was 1,363,000 when I left office in 2007, and by 2012 it had fallen to 1,300,300. A declining population not only lowers the functions of regional communities, but also makes it difficult to maintain services essential for daily life, such as medical care and education. While I was governor, measures I adopted included the introduction of a remote medical system based on the use of information technology (IT), providing subsidies for relocation expenses to those living in villages facing risks of natural disaster, and promoting consolidation of such villages. These policies were effective for the purpose of maintaining the functions of regional areas, but they were still passive.... [Read more]

No.18 ,Economy
Jan 20, 2014

A Farewell to Japanese Employment Practices Why is regular employment system reform necessary? Proposals made by the regulatory reform council

This June, the government’s Council on Regulatory Reforms submitted a report on regulatory reforms to Prime Minister Abe Shinzo. The report discusses areas such as deregulation policies on employment highlighting “regular employment system reform” as one of the three approaches to be taken to reforming Japan’s employment system. Having served as a chairman of the working group on employment for compiling the report (refer to table on p. 2), I would like to give my perspectives on the background, objectives and specific policies regarding regular employment system reform. ... [Read more]

No.18 ,Economy
Jan 20, 2014

Abenomics: What economic picture will its third arrow draw in the middle-term?

The third arrow of Abenomics, a growth strategy, aims at revitalizing industries, creating markets for selected sectors with the promise of future growth, and expanding global outreach. Prime Minister Abe’s growth strategy, formulated in June 2013, gave a timeline for implementing measures to realize these goals; many are expected to be on schedule. This would remedy one of the weaknesses of Japan’s business environment – the ease of starting a business. However, not all measures in the growth strategy have a clear direction, nor do they all contribute directly to structural reforms. Creating markets in Japan’s health-care and agricultural sectors are examples of this, though the premier has shown a strong will to deregulate these and may have a clearer vision of their impact. Still, challenges remain for the private sector, in a rigid employment system and with high corporate taxes. Attention should be paid to the premier’s leadership in these fields, for which he has just started coordination but has yet to decide a clear direction.... [Read more]

No.18 ,Diplomacy
Jan 20, 2014

A Nation of Proactive Pacifism — National Strategy for Twenty-first-Century Japan

Japan’s first National Security Strategy, along with the new National Defense Program Guidelines, which were approved by the Cabinet on December 17, 2013, established the idea of “proactively contributing to peace based on the principle of international cooperation” as part of the basic principles of Japan’s future diplomacy and national security policies. This shift is based on the "proactive pacifism" approach that has been advocated by Prime Minister Abe Shinzo since September 2013. For more than a few foreign observers, it came like a bolt from the blue when Abe began to assert that Japan should become a more proactive contributor to peace, and they therefore found it somewhat difficult to discern his real intentions. However, in fact, Abe was not the first to conceive of a “proactive contribution to peace.” Since the end of the Cold War, certain circles within Japan’s diplomatic and national security community have continued to call for Japan to transform its postwar pacifism from being passive to being proactive. I am actually one of them. This isn’t about doing away with postwar pacifism, but an attempt to maintain its virtues while correcting its shortcomings so as to conform to Japan's increased national power and the drastic changes that have taken place in international society since the end of the Cold War. ... [Read more]