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Economy, No.27  Jun. 13, 2015

The Piketty Phenomenon and Reality in Japan: Distributive Politics – Overemphasis and the Lack of Growth Policies

Kojima Akira, Member, Board of Trustees, and Adjunct Professor, National Graduate Institute for Policy Studies (GRIPS); Trustee, Chairman of the World Trade Center Tokyo

Dubbed a “rock star” economist as he emerged from France, Paris School of Economics Professor Thomas Piketty has also caused a major sensation in Japan. The Japanese translation of his stand-out publication, Capital in the Twenty-First Century, sold more than 100,000 copies within the first few weeks of its release. In the publishing industry, which is suffering from a structural publishing slump, publishers of the Japanese editions of foreign books have become an object of envy. The theme of the book is inequality, and in Japan, where widening inequality has long been a source of lively debate, “inequality” has become a point of contention which has even found its way into economic policy debates in the National Diet. Capital that doesn’t earn money and the decline of entrepreneurship However, isn’t the reality in Japan something unique and quite different from Professor Piketty’s argument? If ... ... [Read more]

Economy, No.27  Jun. 6, 2015

The Future of the Asian Infrastructure Investment Bank: Concerns for Transparency and Governance

< Key Points > The international finance system has reached a key turning point The lack of a Board of Directors in AIIB, as well as China possibly using AIIB for political purposes, are still major concerns Given these concerns, it was the right decision for Japan not to join as a charter member in order to negotiate the MOU It was a surprise that the UK decided to join in the AIIB, followed by Germany, France and Italy Japan should maintain the option of joining the AIIB depending on the AIIB’s reform proposals At the time of the IMF and World Bank Spring meeting in Washington in April, there was much media attention over the Asian Infrastructure Investment Bank (AIIB) proposed by China. Both the IMF and the World Bank have publicly welcomed the AIIB as a sign of increase in funding for ... ... [Read more]

Economy, No.26  Jun. 5, 2015

Superconducting Maglev Technology: Future and Development

The journey toward realizing superconducting magnetic levitation (maglev) that achieves speeds of up to 500 kilometers an hour has come one step closer to its end, with the emergence of a train known as the linear motor car. JR Central, which is responsible for the operation of the Tokaido Shinkansen line, started work on the construction of the Chuo Shinkansen line for use by the superconducting maglev at the end of last year. The occasion was marked with a ceremony held on December 17, 2014 to pray for safe construction of the line, which will run between JR Central’s Shinagawa Station in Minato Ward, Tokyo and Nagoya Station in Nagoya, Aichi Prefecture. If all goes well, service is scheduled to begin in 2027, when linear motor cars will connect the 285.6-kilometer distance between Shinagawa and Nagoya in as little as 40 minutes. “Superconducting maglev” ... ... [Read more]

Economy, No.26  Jun. 5, 2015

Fifty Years of the Shinkansen, and the Opening of the Hokuriku Shinkansen

The Safety of the Shinkansen October 1, 2014 marked the passage of fifty years since the opening of the Tokaido Shinkansen (bullet train line), which was Japan’s first Shinkansen, and also the world’s first high-speed railway. Japan’s Shinkansen network—which began with the 552.6 km stretch between the stations of Tokyo and Shin-Osaka—has continued to grow and expand and, including the new Hokuriku Shinkansen (between Nagano and Kanazawa) that entered service on March 14, 2015, has now reached a total length of 2,848.3 km. (See the table: Shinkansen) The Shinkansen mentioned above are the ones capable of running at speeds of over 200 km/h. Apart from these, there are also the 275.9 km of the Yamagata and Akita Shinkansen, which are both of the type that run onto conventional train lines; the Hakata-Minami Line; and the 1.8 km stretch of the Joetsu Line between Echigo-Yuzawa ... ... [Read more]

Economy, No.25  May. 14, 2015

Abenomics Walks a Tightrope as Difficulties Lie Ahead

YOSHIZAKI Tatsuhiko, Chief Economist, Sojitz Research Institute, Ltd.

Few prime ministers who have been elected from the Liberal Democratic Party (LDP) have won general elections two times in a row. When speaking of prime ministers who demonstrated shrewdness in elections, some people may make mention of Koizumi Junichiro. However, although Koizumi won a landslide victory in the 2005 election following a dissolution of the Diet staged under the name of postal-services reform, his re-election at the previous poll in 2003 was much less convincing for the LDP, the result not something to boast about. Likewise in 1986, Prime Minister Nakasone Yasuhiro brought victory to the LDP — winning more than 300 seats for the only time ever in the era of the multi-seat constituency electoral system. Nakasone however experienced great difficulties in the previous, 1983 election as a result of the Lockheed scandal judgment of Tanaka Kakuei, earlier the same year. Put another ... ... [Read more]

Economy, No.25  May. 12, 2015

Control of social security expenses should be expedited.Ensuring Escape from the Deflationary Spiral and to Again Increase Consumption Tax― Outlook of the primary balance of the central and local governments― Case where consumption tax rate was raised to 10% as originally planned

・The move to escape from the deflationary spiral also contributed to the improvement of the primary balance.
・The reduction of the deficit by half in fiscal 2015 is challenging, but the focus is on the next step.
・The rapid rise in social security expenses is more serious than the postponement of the tax hike.
With the postponement of the consumption tax hike and the dissolution of the House of Representatives, economic policy entered a new phase. Discussions have commenced on the evaluation of Abenomics in the past two years and the new outlook following the election. I wish to tidy up the points under]]> ... [Read more]

Economy, No.25  May. 12, 2015

Medium-term economic forecast — Japan Center for Economic ResearchEstablish Social Security that will Support the Future Generation— Allocate 13 trillion yen to childcare support. Stop investing public funds in medical insurance and seek independence.

・Action on the declining birthrate will revive the birthrate, bolstering the growth rate.
・Raise medical and nursing care insurance premium rates and patients’ self-pay rates.
・Encourage nationwide discussions by showing choices for painful reforms.
Following the Lower House election that was held in December 2014, it has been determined that the next consumption tax hike will be put off for eighteen months, and the roadmap for fiscal reconstruction has become increasingly uncertain. Meanwhile, the number of births fell in 2014 to a level that almost dropped below the benchmark of 1 million. The government has set a ]]> ... [Read more]

Economy, No.25  May. 7, 2015

Tightening Job Market Begins to Drag Down the Economy — Challenges Confronting the Second Stage of Abenomics

Komine Takao, Professor, Department of Regional Development, Taisho University

Since the spring of 2014, a labor shortage in Japan has emerged as a sudden challenge to its economy. Until just before this shortage became apparent, our normal discussions on the economy primarily focused on possible countermeasures that could be taken to address unemployment issues, which were for the most part intended to provide for employment opportunities in response to such questions as “How do we put an end to the rising unemployment rate?” or “How do we improve the employment of young adults?” and “How do we ensure employment for the elderly by the time they start receiving pension?” But after the spring of 2014, Japan was suddenly confronted with a labor shortage, which must have been a huge surprise to the general public at the time. I believe that the package of economic measures called Abenomics, which was launched in November 2012, ... ... [Read more]

Economy, No.24  Feb. 24, 2015

It is not time for local governments to compete with each other. Intensive investment in key base cities nationwide is urgently needed.

Toyama City introduced a new public transportation system “Toyama Light Rail Portram” in 2006.

In postwar Japan, the spread and expansion of urban areas accelerated due to an explosive population increase. We saw occasional disorderly land development and residential areas grew endlessly. The central and local governments cooperated to develop infrastructure in every corner of the country and to facilitate an equalized distribution of educational, fire-fighting, medical and welfare services across the country. However, we see many vacant houses and spaces everywhere nation-wide today. The deterioration and disuse of water supply pipes, sewage systems, roads and school facilities are on-going. In the future situation in which Japanese society will face financial stringency due to the acceleration of depopulation and population aging, it will be impossible for all local municipal governments across the nation]]> ... [Read more]

Economy, No.24  Jan. 16, 2015

Japan’s Economy after Exit from Deflation* Potential growth rate has fallen close to zero percent due to decline in productivity ― Need for declaration of exit from deflation and strengthening of supply capacity

HAYAKAWA Hideo, Executive Fellow, Fujitsu Research Institute

The CPI is steadily rising as a result of the BOJ’s new phase of monetary easing. Meanwhile, the unexpectedly low GDP growth rate indicates the low level of the potential growth rate of the Japanese economy. The potential growth rate is probably currently close to zero percent. In order to raise this, productivity needs to be increased. Given that the economy has exited deflation and has attained almost full employment, there is no need for additional demand creation. What needs to be done is to strengthen supply capacity and restore fiscal health, and to set a clear guideline that this needs doing before the CPI reaches 2%. End of deflation The “greatest achievement” of the BOJ’s new phase of monetary easing (quantitative and qualitative easing; QQE) in terms of its effect on the Japanese economy is, undoubtedly, that it pushed up prices. The core ... ... [Read more]