Points: Japanese economic growth rate set to slow under present circumstances Lifetime consumption rising with longer lifespans and working careers Boost consumption tax to 15% to provide for greater job diversity The Japanese economy continues to expand thanks to strong economies abroad. However, caution is still needed in assessing the medium-term economic outlook. In our Medium-Term Economic Forecast, we consider the relevant issues. World economic growth rates are rising in the short term, led by developed countries. The International Monetary Fund (IMF) revised in January their forecast a high of 3.9% world economic growth rate for 2018. Hidden in the backside, however, are a number of downside factors, and we believe that rates will slow over the medium term. The first factor is a structural one, namely the erosion of the United States potential growth rate, which gauges the long-term production capacity of the ... ... [Read more]

  As HondaJet continues its successful demonstration tour of Europe, Katayama Osamu looks back on the development of the aircraft, the fastest, highest-flying, quietest, and most fuel-efficient jet in its class. A red and white aircraft landed at Haneda Airport under a blue sky on 23 April 2015. It was a proud moment for HondaJet, whose development has been ongoing for approximately thirty years, since 1986. On the first day of its world tour en route to Japan and Europe, HondaJet made its first appearance outside the United States. At the commemorative press conference on the same day, the president of Honda Motor Co., Ito Takanobu, said, “Ever since its foundation, Honda has always had a dream of flying in the sky. Today, the dream that was held by the founder, Honda Soichiro, and the dream to enter the aircraft industry, thereby achieving three-dimensional mobility, have been ... ... [Read more]

After 2025, by when the baby-boomer generation will have turned 75, medical and nursing care expenses will be a severe issue. How should we construct an efficient system of benefits and payments? The author will describe the organization of the current system and measures for efficiency and consider a realistic solution. 1.Rapidly rising medical and nursing care expenses It is widely known that medical and nursing care expenses have been increasing along with the aging population. As we move closer to 2025, when the youngest baby-boomer will turn 75, we cannot find effective measures for rapidly rising medical and nursing care expenses. At the beginning of this discussion, the author will describe the organization of the current situation of medical and nursing care expenses. According to the “The Financial Statistics of Social Security in Japan ” published by the National Institute of Population and ... ... [Read more]

Key points: Private sector financial surplus can offset government financial deficit Domestic liquidity may be tight in second half of 2020s Long-term interest rates could rise before deficit in current account At a meeting of the Council on Economic and Fiscal Policy last January 23, the Cabinet Office announced its “Economic and Fiscal Projections for Medium to Long Term Analysis.” The projections show that, even if economic growth is achieved as targeted under its growth scenario, the government now projects that a surplus will not be achieved in the central and local government primary balance until the fiscal year ending March, 2028, or two years later than the last projection made in July, 2017. Debt repayment will be limited since a portion of the increased revenue from the October 2019 consumption tax hike will be allocated to childcare support, and total factor productivity (representing ... ... [Read more]

Key Points Japan has lagged behind in terms of human investment because of excessively expanded social insurance. Low-income earners are disadvantaged in terms of the social insurance burden and benefits. Reforms are needed that require middle- and high-income earners to make self-help efforts. The government has published the “New Economic Policy Package”, and drafted the fiscal 2018 Budget  including annual tax reforms, with human resource development as the central pillar. I do not object to this direction, but there has been little analysis and verification of problems in the existing system based on data and evidence. The burden will be forced on children who lack voting rights if the budget deficit increases to improve childcare and education. In this article, I will discuss the tasks and remedies for overcoming the declining birthrate and aging population. Human capital investment is a common issue in advanced ... ... [Read more]

Key Points Policy switches in multiple fields have become an issue in advanced countries. The conversion of Japan’s social security systems to whole-generation social security produced results of a certain level. A future vision for a society to aim for should be clarified. The administration headed by Prime Minister Abe Shinzo has advanced support for women’s employment and working style reforms since 2015 under its slogan of promoting the dynamic engagement of all citizens. In December 2017, the Abe cabinet decided on a package of new economic policies and announced new measures for assisting with childcare and education in the name of human resources development in addition to measures collectively referred to as a productivity revolution. An outline of these measures is provided below. As measures for supporting childcare, the government will uniformly dispense with fees for using authorized facilities, such as kindergartens and ... ... [Read more]

The rise of digital currencies, including Bitcoin, causes us to predict the arrival of a new era. This is because the technology of blockchain, which constitutes the foundation of many digital currencies, is likely to prompt the emergence of completely new systems for investments and settlements of capital. However, it is undeniable that many of these systems still involve problems. Particularly alarming is capital procurement known as Initial Coin Offering (ICO), which uses the function of digital currencies called Ethereum. I will not provide a detailed explanation of what ICO is. But suppose that there is an imaginary ledger that is shared on the Internet using blockchain technology, and that the relationships of many rights and contract items are described there. Suppose that the rights corresponding to currencies are written there. In this situation, it would be possible to automatically move currency-based values in ... ... [Read more]

Key Points Japanese economy: Likely to slump after Tokyo Olympics Emergency Measures: Continuing through 2020s not possible Healthcare Insurance: Adopt funded individual savings account system This autumn Prime Minister Abe Shinzo is expected to decide whether or not to proceed with the 10% hike in the consumption tax rate, which is scheduled for October, 2019. During the House of Representatives election held in October of last year, the ruling party promised to allocate a portion of the revenue increase from the consumption tax hike to educational expenses, as by strengthening preschool education. Originally, 80% of the revenue increase was supposed to be allocated to paying down debt. But that would not benefit the younger working generation, and yet cutting social security spending to fund preschool education would be opposed by the elderly, so that’s not an option either. The government has secured a funding ... ... [Read more]

Key Points TPP-11 is a great achievement in Japanese economic diplomacy “Frozen” items will not detract from the quality of the agreement Move towards data localization should be restrained In November, a new broad agreement based on the Trans-Pacific Partnership (TPP) was reached between 11 countries, excluding the US, in Da Nang, Vietnam. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP, or TPP-11) represents a major step towards putting the TPP into practice. Four points were listed as requiring further negotiation. They were on state-owned companies (Malaysia), services and investment in the coal industry (Brunei), dispute settlement (Vietnam), and cultural exceptions (Canada). Once these points have been agreed and signed off however, the agreement will be ratified by at least six countries, irrespective of their economic scale. With the US currently distancing itself from the TPP under the Trump Administration, some have claimed ... ... [Read more]

Key Points Japan should pursue common Japan-U.S. interests, with an eye towards China Bilateral negotiations over Japan-U.S. free trade agreements (FTAs) have effectively already begun Japan should collaborate with Australia and European states in the formation of a free trade coalition The Japan-U.S. Economic Dialogue was launched during U.S. Vice President Mike Pence’s upcoming visit to Japan in April, 2017. In addition to affirming the success of the Japan-U.S. summit meeting in February, the Dialogue is also an attempt to contain and manage the various criticisms made by President Donald J. Trump. This is common practice in managing Japan-U.S. economic relations, and similar methods have been employed in the past; such as in the Comprehensive Economic Talks held under the Clinton administration, and the Vice-Ministerial Level Economic Dialogue held under the Bush administration. (Please refer to the table.) In order to avoid accidental outbreaks ... ... [Read more]