Komine Takao, Professor, Taisho University   The economic shock sparked by the COVID-19 coronavirus appears to be unprecedented in terms of its magnitude and the level of difficulty in addressing it. At the time of writing, early April 2020, the crisis is ongoing and the situation is changing from moment to moment. The whole picture is as of yet unknown. The following discusses the challenges that lie ahead of the Japanese economy based on the information that is available so far. An abrupt change in circumstances and a colossal dive The coronavirus crisis has several unique characteristics. The first is the speed of the deterioration of economic conditions. As discussed below, the Japanese economy is facing the impact of multiple negative factors. This totally changed many people’s perception of the economy. For example, the economic view of the Japanese national government stated in the ... ... [Read more]

Todo Yasuyuki, Professor, Waseda University Key points: Bringing manufacturing back to Japan comes with risks Don’t fall behind the expansion of global value chains Build strong ties with mutual help with partners abroad The disorder caused by the spread of COVID-19 continues. Nonetheless, we need to look toward the “Post-Coronavirus world” amid this confusion. This paper is a consideration of what supply chains and value chains Japan ought to build in the world after the coronavirus crisis. Value chains refer to networks of economic activities that generate value, including upstream R&D and design as well as downstream marketing and data analysis, and that exist in addition to the supply chains for materials and components. The Japanese government is already taking action. The spread in China disrupted the procurement of parts, components and materials from China. This is why the government is now going to ... ... [Read more]

Komine Takao, Professor, Taisho University   Due to the COVID-19 pandemic, the Japanese economy is facing an unprecedented crisis. It is obvious that the economy has declined significantly, although adequate data is not available. To see how sharply the economy has declined, let’s look at forecasts of real GDP trends. The ESP Forecast Survey (on May 14, 2020) by the Japan Center for Economic Research (JCER) shows that the average of the annualized real GDP growth rate forecasts of leading economists is -4.6% year-on-year for the January-March quarter of 2020 and -21.3% for the April-June quarter. With a negative real GDP growth rate having been recorded in the October-December quarter of 2019, real GDP growth has been in negative territory for three consecutive quarters. A major economic characteristic of the corona shock is that it is the combination of a demand shock, a supply ... ... [Read more]

Trump signs China trade deal but the underlying economic conflict does not end President Trump signed an initial trade deal with China. As expected, markets seem to have reacted positively to the initial agreement by the two governments. But the tariff fight started by President Trump seems only to be a surface-level conflict between the United States and China. In fact, at a deep level, there has been consistent escalation of the technological power struggle, which is growing more serious within Congress and the Washington policy-making community as a whole. More recently, Washington policymakers have redefined the strategic framework for the US relationship with China from a human rights perspective. The technological power struggle with China has become so deeply entrenched within the Washington policy community that even President Trump cannot make a deal with China easily without listening to them. Therefore, I believe ... ... [Read more]

Ⅰ. Introduction The Japanese government raised the consumption tax rate to 10% in October 2019. Many people have criticized such tax increases, citing them as a cause of an economic downturn. However, the tax hike resulted from an increase in social security expenses associated with the aging of the Japanese population. Another source of revenue would have been sought or the control of benefits would have been requested if the consumption tax was not picked as a solution. In fact, social security benefits will expand from the current level of 120 trillion yen (the figure for fiscal 2018) to 190 trillion yen in fiscal 2040, according to a trial calculation performed by the Cabinet Office. Such an increase in social security expenses is due to the structural problem in twenty-first-century Japan called aging. It will not be all right when the economy picks up. ... ... [Read more]

  While this agreement can be assessed as “a deal where both sides gained benefits,” Japan has already used up the beef and pork card, which means that the “second stage” of the negotiations would likely be more severe.   The Japan-US trade negotiations that started in April 2019 reached an agreement at the Japan-US summit on September 25 and the Japanese and US governments signed the Japan-US Trade Agreement and the Japan-US Digital Trade Agreement on October 7. Because the agreements needed no approval from the Congress of the United States, they went into force on January 1, 2020, after they were approved at the 200th Extraordinary Session of the Diet underway in Japan. Because no new legislative or budgetary measures were needed for the implementation of the agreements in Japan, there are no related bills. The Japan-US Digital Trade Agreement is “TPP-plus” ... ... [Read more]

Key points: The government outlook is premised on growth, with some uncertainty. Distinguish between risk dispersion and redistribution functions Intensively direct public funds to those in desperate need The consumption tax rate has been raised to 10%, marking the end of the comprehensive reform of social security and taxation systems that started in the mid-2000s. But we face the 2025 problem of the baby boomers reaching the age of 75 and social security reform is now entering a crucial stage. As poverty grows amid slower economic growth and depopulation and population aging begin deepening in earnest, politicians are now expected to reconstruct sustainable social security; that is, to carry out sweeping reforms to facilitate the balance between social security benefits and contributions. The starting point for the fiscal reform debates is the May 2018 paper, “The Projections for the Future of Social Security with ... ... [Read more]

Key points: Virtually sealed off the imposition of additional tariffs on automobiles Digital trade rules to be applied to the Japan-US Trade Agreement in advance Persuade the US to return to the TPP On October 7, the Japan and the US governments signed the Trade Agreement between Japan and the United States of America (Japan-US Trade Agreement) and the Agreement between Japan and the United States of America concerning Digital Trade (Japan-US Digital Trade Agreement). One year since the agreement on the start of negotiations in the Japan-US joint statement announced on September 26, 2018, and half a year since the start of substantive negotiations in April 2019, they have concluded the following. In the Japan-US Trade Agreement, Japan responded to the US demand for the liberalization of agricultural products, including beef, while negotiations will continue on the US’ elimination of tariffs on automobiles ... ... [Read more]

Key points: Decreased expectations for the effects of unconventional monetary easing policy Monetary easing is used as an alternative to appropriate policy measures Wise spending should be emphasized in expanding fiscal policy Up until 2018, a lot of attention was focused on an exit from monetary easing. The situation completely changed in 2019, when the Federal Reserve Board (FRB) lowered interest rates three times starting in August and the European Central Bank (ECB) decided in September on additional monetary easing, including the further lowering of already negative interest rates. Financial markets are caught up in the atmosphere of global monetary easing. Now, however, we are in a different environment than in 2010 to 2012, when unconventional monetary easing policies were implemented all around the world. Quite a few economists and economic analysts have a critical view of the recent monetary easing. First, developed countries ... ... [Read more]

Political calculation and media resonance Japan-ROK relations have become more complicated than necessary　over the export control issue. First of all, let me get into the　background of this issue. It started from a press release from the Ministry of Economy, Trade and Industry (METI) on July 1, titled “Update of METI’s licensing policies and procedures on exports of controlled items to the Republic of Korea (ROK).” The title actually just said, “[the Ministry] will apply updated licensing policies and procedures.” But media reports immediately after the press release gave sensational and stirring headlines saying “Embargo,” “Implementation of export restrictions” and “Countermeasure.” Media reports have just recently changed their language to “Strict implementation of export controls” and “Removal of the ROK from ‘White List.’” But how much time did it take? Some media reports have continued to persistently use the word export restriction, though. What do ... ... [Read more]