< Key Points > * Real wage rate after 2000 has been stagnant * Biggest factor is declining terms of trade * No room to boost labor share to any significant degree Prime Minister Abe Shinzo and his administration are actively encouraging businesses to raise wages. But are wage increases really possible, judging from the productivity trends? And, if so, then what are the necessary conditions? A nation’s labor productivity is measured by the real gross domestic product (GDP) generated per hour of labor. Of the real GDP per hour of labor (e.g. 5,000 yen per hour), the real labor cost per hour (e.g. 3,000 yen per hour) is distributed to labor. Therefore, in simplified terms, if the rate of increase in real wages exceeds that in labor productivity, labor share (60% in this example) should increase. If labor share continues to grow, return on ... ... [Read more]

< Key Points > * Reconcile labor and management thinking on the consumption tax * How corporate revenue is allocated influences the revenue * Necessary to monitor excessive labor intensification Since the beginning of this year, Prime Minister Abe Shinzo has actively sought wage increases for employees in the industrial sector. Wage levels in Japan are continuing to stagnate, resulting in weaker buying power for households (see the graph). The logic behind the demand for a wage increase is that a rise in wage levels would revitalize consumption, which accounts for about sixty percent of GDP, and facilitate a break with deflation.  As a result, some corporations raised wages at the negotiations between labor and management in the spring of this year, but there was hardly any reaction in the wage levels of the economy as a whole. According to the Monthly Labour Survey ... ... [Read more]

At the Government-Labor-Management Meeting held in the Prime Minister’s office on October 17, representatives from two leading Japanese companies—namely, President Toyoda Akio of Toyota Motor Corporation and Chairman Kawamura Takashi of Hitachi, Ltd.—expressed their positive views toward a wage increase. Prime Minister Abe Shinzo responded to this by saying, “We have heard very encouraging news.” Several years ago, or even just a year ago, there weren’t many people who thought that a wage increase would be a real possibility. I’m probably not the only one who feels that this trend has changed. Nominal wages began to decline in Japan between 1997 and 1998, just as a financial crisis was taking place. Many economists believe that, just like inflation, deflation is a “monetary phenomenon”—that is, deflation happens when the amount of money in the market is insufficient compared to the amount of goods. However, I ... ... [Read more]

Two Myths about the Consumption Tax In late August 2013, Japanese interest was focused on whether the Abe administration would raise the consumption tax as planned. The government invited sixty experts to the prime minister’s office and interviewed them regarding the pros and cons of a consumption tax hike and the necessary policies associated with the tax hike. The second intensive review meeting on August 27, which I participated in and that the mass media called “a showdown,” attracted attention, as four experts who were opposed to a consumption tax hike, led by Hamada Koichi, Tuntex Professor Emeritus at Yale University and a special advisor to the Cabinet, and five experts including me who supported a consumption tax hike, seriously discussed the issue. The minutes of the meeting are posted on the website of the Cabinet Secretariat, and I would imagine that many people ... ... [Read more]

This June, the government’s Council on Regulatory Reforms submitted a report on regulatory reforms to Prime Minister Abe Shinzo. The report discusses areas such as deregulation policies on employment highlighting “regular employment system reform” as one of the three approaches to be taken to reforming Japan’s employment system. Having served as a chairman of the working group on employment for compiling the report (refer to table on p. 2), I would like to give my perspectives on the background, objectives and specific policies regarding regular employment system reform.   “Labor mobility” is the key term  The Abe administration launched an economic growth package featuring a growth-generating structural reform strategy as an issue of top priority. This means that structural reform was the first item called for in order to produce economic growth. There are three possible approaches we can take to have the labor/employment ... ... [Read more]

[Summary] The third arrow of Abenomics, a growth strategy, aims at revitalizing industries, creating markets for selected sectors with the promise of future growth, and expanding global outreach. Prime Minister Abe’s growth strategy, formulated in June 2013, gave a timeline for implementing measures to realize these goals; many are expected to be on schedule. This would remedy one of the weaknesses of Japan’s business environment – the ease of starting a business.  However, not all measures in the growth strategy have a clear direction, nor do they all contribute directly to structural reforms. Creating markets in Japan’s health-care and agricultural sectors are examples of this, though the premier has shown a strong will to deregulate these and may have a clearer vision of their impact. Still, challenges remain for the private sector, in a rigid employment system and with high corporate taxes. Attention should ... ... [Read more]

Gross domestic product (GDP) is one of the indices that measure a nation’s wealth. As is widely known, Japan’s GDP came in third today, overtaken by China. Japan is no longer in the top tier worldwide in terms of GDP per capita. Meanwhile, in contrast to what is indicated by those economic indices that measure the flow of goods and services like GDP, if you observe “inclusive wealth,” a stock index announced by the United Nations last year, Japan ranks second after the United States, and has the largest amount per capita. This paper will discuss Japan’s strengths and weaknesses while reviewing recent GDP trends, followed by an explanation of the Inclusive Wealth Index. Japan’s GDP is on a downtrend, both on a gross and a per capita basis  In this section we look at an international comparative analysis of GDP in the World ... ... [Read more]

Japan is creating new global products, including robots and regenerative medicine. CYBERDYNE Inc. — The robot suit obtains certification in Europe In August 2013, the world’s first medical treatment robot took its first step. The robot is the Robot Suit HAL (Hybrid Assistive Limb), which was developed by CYBERDYNE Inc., a robot venture from the University of Tsukuba. Its smart design with the basic theme of white is captivating. It conforms to the body and supports and enhances physical functions and helps users regain lost functions. HAL was recently granted a CE Mark, a medical device certification. This represents the birth of the world’s first robot capable of treating people. HAL works in the following way. When people try to move their bodies, very weak biosignals escape to the surface of the skin, reflecting that intention to move. HAL captures these signals through its ... ... [Read more]

Over half of a smartphone’s internal parts are made in Japan. With Chinese and ROKn smartphone makers expanding their share, will Japanese parts maintain their strength? Open it up, and it’s made in Japan – this is something we often find. While Japanese smartphone manufacturers have a very low presence, the ratio of that which is made in Japan rises when it comes to parts. Capable of Internet access, calling and multiple other functions, all in a handheld size, smartphones consist of numerous Japanese electronic parts and materials that are small and provide high-performance quality. Republic of Korea’s Semco on the rise, yet Japanese makers maintain their presence in ultra-small products The small parts field is one where Japanese manufacturers excel. Multilayer ceramic capacitors (MLCCs) are parts that store electricity and are indispensable to a great many electronic products. They assist power supply and ... ... [Read more]

Japanese manufacturers are currently at a big turning point. In the television industry, known to be their forte, Japanese manufacturers used to have global brands, superior competitiveness, and technological capabilities. However, Sony, Sharp, and Panasonic, all of which had displayed strong competitiveness in this industry with their high-resolution digital TVs, have undergone serious financial crises. All three manufacturers had to remove their top managers. They were also forced to make significant cuts to their workforce. These developments gave rise to the pessimistic view that Japan’s manufacturing-based national development was beginning to decline. However, Japanese manufacturers are maintaining their competitive advantage in global markets and securing high profits in sectors including machine tools and high-quality components and materials, such as carbon fiber. Among Japanese products, robot suits, which assist people who have difficulty walking, are drawing attention. A rapid paradigm shift seems to be taking ... ... [Read more]