< Key Points > * Reconcile labor and management thinking on the consumption tax * How corporate revenue is allocated influences the revenue * Necessary to monitor excessive labor intensification 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 ... ... [Read more]

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. Nominal wages began to decline in Japan between 1997 and 1998, just as a financial crisis was taking place. Many economists believe that, just like inflation, deflation is a “monetary phenomenon”—that is, deflation happens when the amount of money in the market is insufficient compared to the amount of goods. However, I ... ... [Read more]

Two Myths about the Consumption Tax 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 ... ... [Read more]

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. Japan’s regional areas are plagued by a “population onus” Currently, a population onus is taking place all across Japan. Let me briefly explain what a “population onus” is, as this concept doesn’t seem to be well known to the general public. The ... ... [Read more]

Overview 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.    ■ Fig. 1 Halt population decline and aging   Source: ... ... [Read more]

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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.   “Labor mobility” is the key term  The Abe administration launched an economic growth package featuring a growth-generating structural reform strategy as an issue of top priority. This means that structural reform was the first item called for in order to produce economic growth. There are three possible approaches we can take to have the labor/employment ... ... [Read more]

[Summary] 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 ... ... [Read more]

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 ... ... [Read more]