Yoshida Yushi, Professor of Economics, Shiga University   In the 21st century, Japan’s current account (CA) has undergone a sea change. This is partly due to external shocks, namely the Global Financial Crisis of 2008, which depressed global demand, and the Great East Japan Earthquake of 2011, which caused substantial damage to the domestic production base. The COVID-19 Shock of 2020, however, has had a completely different impact. Broadly speaking, CA can be divided into the balance of trade, services, and income. The balance of trade is the difference between the value of exports and the value of imports; the balance on services is the difference between country’s inbound travel and transportation and country’s outbound travel and transportation; and the balance on income is the difference between income (compensation of employees and investment income) earned from overseas and income paid overseas. For many years, ... ... [Read more]

Ueda Kazuo, Professor, Kyoritsu Women’s University   Key points A shift to a total rejection of fiscal deficit and government debt Large government debts negatively impact potential growth rate Continuing to refinance entails the risk of heavy losses   Every country’s finances have deteriorated significantly, mainly due to expansionary fiscal policies in response to COVID-19. According to the International Monetary Fund (IMF), the ratio of outstanding debt to GDP in developed countries in 2020 will exceed that immediately following World War II, making it the highest since the late nineteenth century. Currently, governments have no choice but to continue to support their economies through fiscal policy. However, a major challenge is the medium- to long-term reduction of fiscal deficit and government debts, which have ballooned to an unprecedented scale. Modern Monetary Theory (MMT) has become a hot topic in relation to how to address ... ... [Read more]

Owan Hideo, Faculty Fellow, Research Institute of Economy, Trade and Industry (RIETI), Professor, Faculty of Political Science and Economics, Waseda University   Much attention has been paid to how the external shock of the COVID-19 pandemic is affecting the relationship between companies and workers. The aging of Japan’s traditional employment system has long been an issue, but even before the Corona crisis, large companies had been working on reforming their personnel systems along with their work styles reform efforts. One example of such attempts is the introduction of “job-based” employment by Hitachi, Ltd.[1] Some believe that the COVID-19 crisis will accelerate the trend. In this article I summarize what has changed due to the crises and explore for what changes are likely in the future. Seniority and late promotion have been cited as problems with the Japanese conventional employment model. These two features were ... ... [Read more]

ITO Takatoshi, Professor at Columbia University, Senior Professor at the National Graduate Institute for Policy Studies (GRIPS)   Key points The “first arrow” succeeded, but the “Price Stability Target” of 2 percent has not been reached Building a framework for monetary and fiscal collaboration to combat COVID-19 Success in terms of TPP11 coming into effect and attracting tourists to Japan   The reason the Abe administration stayed in power for such a long time was that it maintained an approval rating of more than 40%. Moreover, a major contributing factor to that high approval rating was positive macroeconomic change through the success of Abenomics. This paper mainly discusses the Abe administration from December 2012 to September 2020. Let us compare the inflation rate, unemployment rate, and Nikkei Stock Average during the Abe administration with those of cabinets since 1998 (short-lived cabinets are totaled) (see ... ... [Read more]

Nobuhiro Kiyotaki, Professor of Economics, Princeton University   Key points Should corporate bankruptcies increase, credit crunch may follow Postponing retirement is more effective than high inflation for fiscal consolidation Promoting open economy is important for growth after the containment of COVID-19   Following COVID-19 pandemic and government restrictions on social and economic activities, the global economy plunged into the deepest recession of the postwar era and the lives of people have been affected profoundly. This article discusses the impact of the COVID-19 pandemic, policy responses and the future direction from a macro-economic perspective. The COVID-19 pandemic makes it difficult to engage in activities that involve social contact and possibility of infection. Consumption, especially services consumption in restaurants, leisure and hospitality, has decreased significantly. Let us look at consumption and employment in the United States by referring to data collected by Professor Raj Chetty of ... ... [Read more]

Inomata Satoshi, Chief Senior Researcher, Institute of Developing Economies, Japan External Trade Organization (JETRO)   Key points Institutional similarity will be even more important in shaping global value chains than geographical proximity Multinational firms will seek to offshore production to countries with robust institutions akin to their home business environment Complete decoupling of the world economy is inconceivable, but partial decoupling is probable   According to Richard E. Baldwin, Professor of the Graduate Institute of International and Development Studies, the international production system is based on tri-polar networks of Factory Asia, Factory North America and Factory Europe. Namely, global value chains (GVC) are not truly global, but are more likely to be regional. How will GVC look like in the post-COVID19 world? They are considered to evolve from regional value chains based on geographical proximity to production networks connected through institutional similarity (of legal ... ... [Read more]

Ito Asei, Associate Professor, University of Tokyo   Key points Toward an “unknown normality” after the US-China conflict and COVID-19 Stronger governance and a more sophisticated, expanding Chinese economy Japan to continue to exert influence on thoughtful action   The concept of the new normal entered the picture after the advent of the Xi Jinping administration. The end of the rapid economic growth and China becoming a middle-income country transformed national issues. The new normal indicated that the administration recognized this fact. But now, after the US-China conflict and COVID-19, China’s political economy finds itself in an unknown normality in a dual sense. This article will confirm the economic situation during the COVID-19 crisis and examine trends in China from the perspective of structural change. There are both strong and weak aspects to the economy in China after COVID-19. At the start of the ... ... [Read more]

Iwamoto Yasushi, Professor, University of Tokyo   Key points Correct inconsistencies between targets and predictions for better fiscal soundness Difficulties to compile budget by end of 2021 as planned Initial budget reduction followed by revisions every quarter   The Emergency Economic Measures for Response to COVID-19, which was formulated in April, includes two stages: an “Emergency Support Phase” until the COVID-19 situation is resolved and a “V-shaped Recovery Phase” after it has been resolved. Supplementary budgets of unprecedented scale was put together to realize this, so much that the state’s general account expenditure included large-scale public spending corresponding to about 1.5 times the FY2019 figures. The “Basic Policy on Economic and Fiscal Management and Reform 2020,” created in preparation for the FY2021 budget compilation, and the “Economic and Fiscal Projections for Medium to Long Term Analysis,” which showed economic and public finance projections until ... ... [Read more]

Kashiwagi Takao, Distinguished Professor at the Tokyo Institute of Technology   Key points Stable supply is the most important energy policy Play a leading role in the development of innovative technologies to promote decarbonization Choosing either renewable energy or atomic energy is not a solution   The basic policy for phasing out inefficient coal-fired power plants presented on July 3 by Kajiyama Hiroshi, the Minister of Economy, Trade and Industry, was shocking. Japan’s energy policy is based on the “3Es+S” concept which holds that efforts should be made from the perspectives of the 3Es, energy security, the economy, and environmental conservation, based on the assumption of the maintained safety of atomic energy. The demand for electricity, while showing a temporary decrease due to COVID-19, has been increasing consistently by 2.6–3.5% globally since 1980. Global electricity demand grew to 2.7 times the 10 trillion kWh ... ... [Read more]

Yamamoto Isamu, Professor, Keio University   Key points Remote work ratio increases with non-routine tasks A company’s COVID-19 measures boost employee loyalty The coronavirus outbreak as an opportunity to reform labor market structure   The spread of COVID-19 has led to rapid work-style changes, such as staggered work hours, remote work, online meetings, closures, and higher risk of unemployment. It is likely becoming a major turning point for changing how work is perceived as well as work styles and human resource management at the workplace. Health and productivity management is garnering attention as a managerial challenge for maintaining and promoting employee health in companies. As it has become clear that corporate work styles, such as whether remote work is implemented or not, affect employees’ risk of infection, it is probable that the need for “health and productivity management that includes COVID-19 measures” will increase ... ... [Read more]