Okazaki Tetsuji, Faculty Fellow, Research Institute of Economy, Trade and Industry (RIETI), Professor, University of Tokyo   Just before noon on September 1, 1923, a massive, 7.9-magnitude earthquake struck the southern Kanto region, which includes Tokyo. According to a survey by the city of Tokyo in 1925, the total number of dead and missing people from the disaster in Tokyo Prefecture and six nearby prefectures stood at about 105,000, including 70,000 in Tokyo Prefecture and 32,000 in Kanagawa Prefecture. There was also massive property damage, amounting to 5.5 billion yen (about 7 trillion yen in 2010 prices). Using the same 2010 prices for comparison, damage totaled about 8 trillion yen for the Great Hanshin-Awaji Earthquake in 1995 and about 17 trillion yen for the Great East Japan Earthquake in 2011. The Great Kanto Earthquake resulted in less damage than the other two. Compared ... ... [Read more]

  Key points High risk of legal instability and unpredictability Economic coercion negating the advantages of free trade Making rules to correct adverse effects of system differences   WATANABE Mariko, Professor, Gakushuin University   At the G7 Hiroshima Summit in May, there was a directional shift from “decoupling” to “de-risking” in relations with China. The term “de-risking” was proposed by Ursula von der Leyen, President of the EU, but similar views were expressed in statements by National Security Advisor Jake Sullivan and Secretary of the Treasury Janet L. Yellen. In a speech in April, Yellen presented three principles of economic China policy: (1) first of all, securing the national security interests of the United States, allies, and partners as well as protecting human rights, (2) otherwise, fair and healthy economic competition with China, and (3) cooperation on global challenges. Sullivan said that “Export controls ... ... [Read more]

  The Global Financial Crisis (GFC) of 2008 triggered calls for reforms that would strengthen financial regulations globally. But amid the stresses of financial disruptions in Europe and the United States, caused by the spread of COVID-19 in the spring of 2020 and the instability of banking systems in early 2023, regulatory reforms did not perform as initially intended; instead they have exposed flaws and even contributed to market fragility. This paper summarizes the malfunctioning of new regulations seen in the context of the pandemic and bank failures, and explores the root causes of the failures and a direction for improvement. Also, it provides an overview of the implications for Japan and how overseas authorities are rethinking their approaches.   Miyauchi Atsushi, Professor, SBI Graduate School of Business Macroprudential Regulations Introduced in the Wake of the Global Financial Crisis Various challenges for post-GFC regulatory ... ... [Read more]

  Nishimura Gota, Columnist, Toyo Keizai Inc.   Foreign observers have begun to point out similarities between the Japanese and Chinese economies. How should we understand the current state of the Chinese economy? What is the issue of “Japanification” that is ongoing in China? China in a state of intoxication There was a time when it was said that selling the land on the inside of the Yamanote Line that circles central Tokyo would earn you enough to buy the whole of the United States. This tends to come up as an illustration of what the bubble economy was like in the late 1980s. In retrospect, it makes little sense, and even at the time, there were many who felt it strange. Even so, it is hard to resist when there is some kind of inertia at work in society as a whole. Nearly ... ... [Read more]

  Suzuki Wataru, Professor, Gakushuin University   Key points The effects of cash payments and in-kind assistance are unclear Re-examining preferences towards stay-at-home mothers and Japanese employment practices All residents should pay for child insurance to secure financial resources   According to the flash report on Vital Statistics released at the end of February 2023, the number of births in 2022 was 799,000, the first time it has ever dropped below 800,000. This includes foreign nationals living in Japan and Japanese nationals living abroad, with an estimated 770,000 or so births among Japanese nationals living in Japan in confirmed reports. (see graph) In the last 50 years, the decline in the number of births has been pretty consistent, but there was a further rapid decline caused by the COVID-19 pandemic. It is concerning that even the recovered total fertility rate has started to decline. ... ... [Read more]

  Kawase Tsuyoshi, Faculty Fellow, Research Institute of Economy, Trade and Industry (RIETI), Professor, Sophia University   The fragmentation of the international trade and investment system is proceeding in the name of national security. In particular, since the years of the Trump administration, the United States has implemented many trade measures for national security reasons. Specific examples include: (1) aggressive application of the Export Administration Regulations (EAR); (2) the imposition of other restrictions on trade in goods and services; (3) the imposition of restrictions on foreign direct investment; and (4) the application of trade regulations from the viewpoint of human rights as a national security matter (see table). On the other hand, the trend of decoupling in terms of trade and investment, which is occurring mainly between the United States and China, is making headway through the recent friendshoring movement, which refers to the ... ... [Read more]

  Otsuki Nana, Senior Fellow at Pictet Japan   The international credit unease that has spread rapidly since the beginning of March is showing signs of quieting down, the last instance being the Credit Suisse bailout by UBS. There has been some praise for the response from the relevant national authorities, which successfully checked the spread of further unease, but on the other hand, many issues pertaining to the state of financial regulations for liquidity and capital, as well as the handling of banking bailouts, have been exposed. Once again, there is need for a debate on how best to stabilize the financial system. If the supply of liquidity from banks stagnates going forward, the possibility of a new financial crisis with its epicenter in nonbanks, or other entities that are not covered by bailout measures, is not zero. Unprecedented turmoil around the credit ... ... [Read more]

  Ito Sayuri, Director, Economic Research Department, NLI Research Institute   Has the world, which has experienced turmoil such as the coronavirus pandemic and Russia’s invasion of Ukraine over the past three years, reached the brink of a financial crisis? In March 2023, several banks in the United States went bankrupt, and management problems at Switzerland’s second-largest bank led to a merger with the largest Swiss bank. In the United States, the outflow of deposits continues due to similarities in business models with the banks that have faced problems. There is also a growing movement to reassess the risks associated with a specific type of bonds issued by banks that have been valued at zero in the Swiss bank merger plan. The emergence of a series of management problems at financial institutions and the reassessment of risks associated with financial products are reminiscent of ... ... [Read more]

  Shizume Masato, Professor, Waseda University   Key Points Domestic production resources are consumed as defense spending increases Ishibashi Tanzan’s argument was realized during the high economic growth period after World War II Japan without economic growth will have a heavy defense budget burden    Is it reasonable to increase the defense budget to 2% of GDP? And should the burden be covered by tax increases or government bonds? There is much to be learned from Japan’s modern history regarding the ongoing debate over defense spending. When Japan was forced to open its treaty ports at the end of the Edo period, neighboring Asian countries fell under Western colonial rule one after another. Under such circumstances, Japanese leaders were faced with the challenge of allocating limited human and material resources to achieve two goals: “Economic development as a source of national power (a wealthy ... ... [Read more]

  KAJITANI Kai, Professor, Graduate School of Economics, Kobe University   A specialized book has attracted a great deal of attention online in Japan since its publication in the United States. That book is Fiscal Policy Under Low Interest Rates by macroeconomist Olivier Blanchard, an eminent professor at the Massachusetts Institute of Technology. As its title suggests, the author claims that, with interest rates, or “safe interest rates” such as yields on government bonds, remaining at a very low level, sometimes below the growth rate, governments should underpin demand in economies experiencing a prolonged period of stagnation where real interest rates have fallen below their effective lower bound (ELB) by increasing the issuance of public debt and implementing aggressive fiscal policy. One reason why Blanchard’s book has generated so much interest in Japan is its positive evaluation of Abenomics, an approach exemplified by its ... ... [Read more]