In 2011, Japan posted its first trade deficit since 1980. Was the deficit a temporary phenomenon? And will it move back into surplus from 2012? It is true that a decline in exports caused by the disruption to supply chains associated with the Great East Japan Earthquake and the flooding in Thailand, combined with an increase in imports of alternative energy, were significant factors for the trade deficit in 2011. In 2012, the trade balance will improve as supply chains return to normal, although it is questionable whether nuclear reactors will resume operation.... [Read more]

The Noda administration has released a plan titled “Comprehensive Reform of Social Security and Tax”, which includes measures such as increasing the rate of consumption tax. They appear to be determined not to concede an inch, but their approach has come in for much criticism. Japan’s budget deficit is clearly in crisis. Looking at opinion polls on the question of raising taxes, the public are expressing a certain degree of understanding with regards to the issue itself, but are opposed to the way politicians are going about it. In a time of crisis, the attitude that leaders adopt is crucial. With this in mind, last year I interviewed two of Japan’s top business leaders. Two men who are well-known as two of the most capable managers in Japan, whose companies have overcome adversity under their strong leadership. They come from completely... [Read more]

Amid a declining loan-deposit ratio (the ratio of outstanding loans against outstanding deposits), Japanese banks have been increasing their holdings of Japanese government bonds. The three mega banks alone held as much as approximately ¥100 trillion of both short- and long-term government bonds as at the end of March 2010. JP Bank held ¥147 trillion worth of bonds. The reasons why Japanese banks are increasing their holding of Japanese government bonds include the following: (i) Demand of corporations for financing has been contracting, as the corporate sector has been a financial surplus sector since 1998,... [Read more]

From GDP to GNI In Japan, economic policy discussions are no longer capable of providing us with dreams. The country is full of gloomy storylines: population decline, ongoing deflation, social welfare difficulties, the incessantly strong yen, and stalled growth. People are also not interested in pursuing the subject of change as they are caught in the grips of past success stories. Things are decided in a trickling way, as if people are thinking that, “at least for now this is all we have to do.” Japan is currently facing many thorny problems, ranging from short-term challenges such as how to recover from the earthquake... [Read more]

Japan Echo Web: Could you tell us about the background for considering revitalization of Japan? Komiyama Hiroshi: When I consider the revitalization of Japan, I look at Japan’s historical position. Japan was a world industrial power in the sixteenth century. From the seventeenth century industrialization paused, while institutions and culture developed.... [Read more]

(i) Japanese firms have become extremely pessimistic about the outlook for their businesses, reflecting concerns over the effects of the Great East Japan Earthquake and the unprecedented strong yen. Managers often make the wrong decisions when they are in excessively bearish mood. If they start developing dual supply chain systems, which will result in higher costs, or if they make hasty decisions to shut down domestic plants only in the pursuit of short-term gains, companies may lose the capability of long-term balanced growth. When facing emergency situations, it is necessary to minimize additional costs, transfer design information to other plants, and develop structures in which the status of suppliers can be monitored efficiently.... [Read more]

The financial sector has reached freezing point More than three years have passed since the collapse of Lehman Brothers in the fall of 2008, and it has been two and a half years since the U.S. economy–which was hard hit by the collapse–bottomed out of its economic downturn. During these periods, despite difficulties in dealing with nonperforming assets, major financial institutions in Western countries have somehow managed to cope with the crises, aided by public money and business restructuring. However, they have not fully recovered. Indeed, their ailments appear to have exacerbated by the fiscal crisis in Europe, which began in Greece.... [Read more]

Disciplining big powers’ actions in line with international economic rules China has emerged in the East Asia region, with its GDP now exceeding Japan’s. It has also attempted to use its military to protect its maritime interests, stirring conflict with neighboring countries. This situation raises concern that China could implement measures that threaten both Japanese and global economic activities, such as by banning exports of rare earths and other natural resources, imposing restrictions on investment and resorting to other means backed by its tremendous national strength. In the same way the World Trade Organization (WTO) dispute-settlement... [Read more]

The effect of Japan’s “lost decade” lingers today, nearly ten years later, and there are still few signs of convincing recovery. Faced with new challenges of recovery and reconstruction from the Great East Japan Earthquake, Japan’s economy will likely continue to confront medium- to long-term constraints that lie ahead, including further population decline, a lower birthrate combined with population aging, and accumulating fiscal deficits. Viewing the current situation it is hard to say that deflation is under control. Advancing strength of the yen and low stock prices tied with the increasing sovereign risk in Europe and the United States are making it increasingly difficult to identify a new growth path.... [Read more]

The Great East Japan Earthquake has forced Japanese companies to renew their awareness of the risks of operating in Japan. Meanwhile, the extremely strong yen, at less than 77 yen to the dollar, has become a persistent condition. Japanese companies, mainly manufacturers, are hit hard by the reduced export competitiveness resulting from the exchange rate. The yen is expected to remain strong for some time since investors have no choice but to buy yen given the euro zone debt crisis and the slumping economy in the United States. On top of this, rapid aging of society and the declining birthrate have made falling domestic demand inevitable. This has... [Read more]