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No.68, Economy  Dec. 2, 2021

The Japan Fair Trade Commission’s Challenges with Apple

  Sugimoto Kazuyuki, former Chairman of the Japan Fair Trade Commission   The Japan Fair Trade Commission (JFTC)’s investigations into Apple Inc. effectively came to a close on September 1, 2021 when Apple announced it would make changes to some global regulations in 2022. Apple submitted an application for changes to regulations that would let users avoid the 15–30% delivery commission for “reader apps” that offer subscriptions for content like books, music, videos, etc., which some media outlets have called an “unusual conciliation.” Currently, all applications (hereinafter “apps”) used by iPhones and other Apple products must be downloaded from the App Store. Until now, application developers had to pay a commission to sell their apps, the so-called “Apple Tax.” In other words, they paid a “protection price” to a “bookmaker.” With the new decision by Apple, developers won’t have to pay the “Apple Tax” ... ... [Read more]

No.67, Economy  Nov. 18, 2021

Climate change and finance: Advantages and disadvantages of mandatory disclosures by companies

Ito Kunio, Professor Emeritus, Hitotsubashi University   Key points Japanese companies rank highly worldwide for number of institutions supporting TCFD Mandatory financial disclosures should avoid disclosure of static information Need to promote corporate behavioral change through dialogue with investors   In response to worsening climate change, the Japanese government has set out its policy of becoming carbon neutral by 2050. I would like to put forward two effective approaches. The first is the disclosure by companies of just the right amount of information – not too much and not too little. The second is the proper evaluation of disclosed information by investment and loan institutions and the provision of ample funds for decarbonization activities and innovation. The Task Force on Climate-related Financial Disclosures (TCFD) is a common framework for driving the world toward climate-related financial disclosures. The Task Force was established in 2015 by ... ... [Read more]

No.67, Economy  Nov. 15, 2021

Climate Change and Finance: For Active Involvement in Decarbonization by Central Banks

Shirai Sayuri, Professor, Keio Universit   Key points Governments should promote measures to develop green finance Governments should support environmental projects by actively issuing green bonds The Bank of Japan should make greater contributions to climate issues through purchasing green corporate bonds and Exchange Traded Funds (ETF)   Green finance that supports improvements in environmental issues has drawn attention in recent years. To limit the global average rise in temperature to 1.5 degrees by the end of this century as compared to pre-industrial levels, a large amount of capital spending and R&D is needed to reduce greenhouse gas (GHG) emissions to net zero by 2050. According to an estimate by the International Energy Agency (IEA), more than double the current annual global investments (550 trillion JPY) will be needed by 2030 and around the same amount will be needed until 2050. Europe is leading ... ... [Read more]

No.67, Economy  Nov. 12, 2021

Teleworking Requires Careful Preparations

Tsuru Kotaro, Program Director and Faculty Fellow, Research Institute of Economy, Trade and Industry (RIETI)   Despite the progress in vaccination, the COVID-19 pandemic continues to rage on. Following the issuance of the fourth declaration of a state of emergency, the government has frequently called for companies to reduce the number of commuting workers by 70%, but there has been little progress in the effort to reduce the flow of commuters. Looking back at the pre-pandemic status of teleworking arrangements, including working from home, although large and listed firms were accelerating the teleworking schemes, the number of people actually working from home continued to be low. Under the COVID-19 crisis, particularly since the issuance of the first declaration of a state of emergency in April 2020, the percentage of employees working from home (telework rate) has risen rapidly (see Figure 1). According to various ... ... [Read more]

No.67, Economy  Nov. 1, 2021

Challenges of Carbon Border Adjustment: Considering the Focus of Expansion of the Carbon Tax

Morinobu Shigeki, Senior Research Fellow, The Tokyo Foundation for Policy Research   Key points EU considers tax to collect the difference in carbon prices A carbon tax on emissions is simple and straightforward Use of carbon tax revenues should take into account growth strategy   On July 14, the European Commission (EC) announced its intention to introduce a carbon border adjustment mechanism (CBAM). The CBAM will apply the European Union Emissions Trading System (EU ETS) to imports of specific products to regulate greenhouse gas emissions in imported products, in order to prevent “carbon leakage,” whereby EU companies shift production bases to countries with less stringent carbon regulations. Full-scale introduction of the mechanism is planned from 2026 for five products: cement, electricity, fertilizers, steel and aluminum. Under the new mechanism, importers will have to purchase certificates to cover their CO2 emission per ton in accordance ... ... [Read more]

No.66, Economy  Sept. 17, 2021

Solar and Wind Power Generation with a Lowered Cost Compared to Thermal Power Generation: The Impacts of 46% Decarbonization—Why Has Japan Missed the Mark?

Maeda Yudai, Executive Editor-in-Chief of EnergyShift The Skyrocketing Greenhouse Gas Reduction Target The global wave of “decarbonization” has already descended upon Japan, and this has led to a great change in that direction. On April 22–23, the Leaders Summit on Climate hosted by the United States was held online after President Biden called for the summit, and there, Prime Minister Suga declared that Japan aims to reduce its greenhouse gas emissions by 46% in fiscal year 2030 from its fiscal year 2013 levels. The original goal was for a 26% reduction, so this number was close to double the original goal. FY 2013 levels are used as reference for these reduction goals, and Japan is already progressing well with energy conservation compared to the rest of the world. I get the sense that energy conservation is quite strict among the population, and industry may ... ... [Read more]

No.66, Economy  Sept. 16, 2021

Protect Workers rather than Zombie Firms: How Do We Rejuvenate the Economy?

Takeo Hoshi, Professor, University of Tokyo   Key points Staying afloat with support despite no hope for performance recovery Hurting the profitability of healthy firms and the economy as a whole Urgent need for policy shift to protect employment rather than firms   When the main character Barbara and her brother visit their father’s grave in the cemetery, an unknown man approaches them with clumsy steps from afar. This is the first scene where a zombie appears in the Night of the Living Dead (1968), which is credited with inventing the zombie movie genre. There are firms that perform badly and have little hope of recovery but that are kept afloat with support from creditors and the government, negatively affecting other firms and stagnating the economy. Likening this to zombie movies, Ricardo J. Caballero, Professor at Massachusetts Institute of Technology, and Anil K. Kashyap, ... ... [Read more]

No.65, Economy  Sept. 2, 2021

Economics Knowledge for COVID-19 Measures: Applying Cognitive Bias to Policymaking

Ida Takanori, Professor at the Graduate School of Economics, Kyoto University   Key points The pessimism bias is stronger in Japanese people than in British people People who have pessimism bias understand the need for self-restraint Education needs to target young men and other groups at high risk of infection   More than a year since the outbreak of the pandemic, the COVID-19 catastrophe has still not abated. Coronavirus is not the only thing that has become prevalent. The academic term “behavior change,” used in the behavioral sciences, has unexpectedly come into widespread use. Behavioral economics considers human rationality to be limited and cognition to be subject to biases, placing emphasis on “nudge” as a means of changing behavior for the better. A declaration of a state of emergency issued in some areas on April 7, 2020, asked citizens to refrain from leaving the ... ... [Read more]

No.65, Economy  Sept. 1, 2021

Rewiring Supply Chains Based on Trust in Laws and Institutions under the U.S.-China Confrontation

Tomiura Eiichi, Faculty Fellow and Program Director at the Research Institute of Economy, Trade and Industry (RIETI), Professor at the Faculty of Economics, Hitotsubashi University   It is difficult to grasp the whole picture of a cross-border supply chain based on publicly available statistics. However, according to a list of suppliers (e.g., parts manufacturers) disclosed by Apple Inc., for example, the supply chain for the company’s products extends across as many as 30 countries/regions. In addition to “snake”-type supply chains, under which long lines of production processes are located across many countries, there are “spider”-type ones, under which intermediate goods are collected from suppliers in many countries. This classification of supply chains was proposed by Richard Baldwin of the Graduate Institute of International Studies, Geneva, and Anthony Venables of Oxford University in the United Kingdom. Many countries have enjoyed the merits of combining the ... ... [Read more]

No.65, Economy  Aug. 30, 2021

The Road to Carbon Neutrality and the Issues of the 6th Strategic Energy Plan

Kikkawa Takeo, Vice President, Professor, Graduate School of International Management, International University of Japan   The confusion caused by the new reduction targets Prime Minister Suga Yoshihide announced a policy of realizing carbon neutrality and reducing Japanese greenhouse gas emissions to a “net zero” by 2050 in his policy speech immediately after his inauguration on October 26, 2020. He also presented the target of reducing greenhouse gas emissions by 46% by FY2030 compared with FY2013 at the Leaders Summit on Climate, hosted by US President Joseph R. Biden, Jr. on April 22, 2021. This new target of a 46% reduction is a considerable upward adjustment of the previous target. At COP21 (The 21st Conference of the Parties to the United Nations Framework Convention on Climate Change), which adopted the Paris Agreement in 2015, the Japanese government made the international commitment to “reduce greenhouse gas ... ... [Read more]