Suzuki Wataru, Professor, Gakushuin University   Key points The effects of cash payments and in-kind assistance are unclear Re-examining preferences towards stay-at-home mothers and Japanese employment practices All residents should pay for child insurance to secure financial resources   According to the flash report on Vital Statistics released at the end of February 2023, the number of births in 2022 was 799,000, the first time it has ever dropped below 800,000. This includes foreign nationals living in Japan and Japanese nationals living abroad, with an estimated 770,000 or so births among Japanese nationals living in Japan in confirmed reports. (see graph) In the last 50 years, the decline in the number of births has been pretty consistent, but there was a further rapid decline caused by the COVID-19 pandemic. It is concerning that even the recovered total fertility rate has started to decline. ... ... [Read more]

  Kawase Tsuyoshi, Faculty Fellow, Research Institute of Economy, Trade and Industry (RIETI), Professor, Sophia University   The fragmentation of the international trade and investment system is proceeding in the name of national security. In particular, since the years of the Trump administration, the United States has implemented many trade measures for national security reasons. Specific examples include: (1) aggressive application of the Export Administration Regulations (EAR); (2) the imposition of other restrictions on trade in goods and services; (3) the imposition of restrictions on foreign direct investment; and (4) the application of trade regulations from the viewpoint of human rights as a national security matter (see table). On the other hand, the trend of decoupling in terms of trade and investment, which is occurring mainly between the United States and China, is making headway through the recent friendshoring movement, which refers to the ... ... [Read more]

  Otsuki Nana, Senior Fellow at Pictet Japan   The international credit unease that has spread rapidly since the beginning of March is showing signs of quieting down, the last instance being the Credit Suisse bailout by UBS. There has been some praise for the response from the relevant national authorities, which successfully checked the spread of further unease, but on the other hand, many issues pertaining to the state of financial regulations for liquidity and capital, as well as the handling of banking bailouts, have been exposed. Once again, there is need for a debate on how best to stabilize the financial system. If the supply of liquidity from banks stagnates going forward, the possibility of a new financial crisis with its epicenter in nonbanks, or other entities that are not covered by bailout measures, is not zero. Unprecedented turmoil around the credit ... ... [Read more]

  Ito Sayuri, Director, Economic Research Department, NLI Research Institute   Has the world, which has experienced turmoil such as the coronavirus pandemic and Russia’s invasion of Ukraine over the past three years, reached the brink of a financial crisis? In March 2023, several banks in the United States went bankrupt, and management problems at Switzerland’s second-largest bank led to a merger with the largest Swiss bank. In the United States, the outflow of deposits continues due to similarities in business models with the banks that have faced problems. There is also a growing movement to reassess the risks associated with a specific type of bonds issued by banks that have been valued at zero in the Swiss bank merger plan. The emergence of a series of management problems at financial institutions and the reassessment of risks associated with financial products are reminiscent of ... ... [Read more]

  Shizume Masato, Professor, Waseda University   Key Points Domestic production resources are consumed as defense spending increases Ishibashi Tanzan’s argument was realized during the high economic growth period after World War II Japan without economic growth will have a heavy defense budget burden    Is it reasonable to increase the defense budget to 2% of GDP? And should the burden be covered by tax increases or government bonds? There is much to be learned from Japan’s modern history regarding the ongoing debate over defense spending. When Japan was forced to open its treaty ports at the end of the Edo period, neighboring Asian countries fell under Western colonial rule one after another. Under such circumstances, Japanese leaders were faced with the challenge of allocating limited human and material resources to achieve two goals: “Economic development as a source of national power (a wealthy ... ... [Read more]

  KAJITANI Kai, Professor, Graduate School of Economics, Kobe University   A specialized book has attracted a great deal of attention online in Japan since its publication in the United States. That book is Fiscal Policy Under Low Interest Rates by macroeconomist Olivier Blanchard, an eminent professor at the Massachusetts Institute of Technology. As its title suggests, the author claims that, with interest rates, or “safe interest rates” such as yields on government bonds, remaining at a very low level, sometimes below the growth rate, governments should underpin demand in economies experiencing a prolonged period of stagnation where real interest rates have fallen below their effective lower bound (ELB) by increasing the issuance of public debt and implementing aggressive fiscal policy. One reason why Blanchard’s book has generated so much interest in Japan is its positive evaluation of Abenomics, an approach exemplified by its ... ... [Read more]

  Momma Kazuo, Executive Economist, Mizuho Research & Technologies   Unattainable 2% inflation target On April 4, 2013, the Bank of Japan (BoJ) introduced “quantitative and qualitative monetary easing” (QQE). Appointed only a month before, Governor Kuroda Haruhiko explained the BoJ’s stance at a press conference as “monetary easing measures of an unprecedented scale.” Ever since then, the BoJ’s policy, which remains in place today, is referred to as “unprecedented monetary easing.” The unprecedented monetary easing had just one objective and that was to reach a target of 2% year-on-year growth in consumer prices (price stability target of 2 percent, hereinafter “2% inflation target”). It will soon be 10 years since introduction of the policy and the 2% inflation target has yet to be reached. Of course, Japan recently experienced inflation for the first time in 40 years, with consumer inflation rising to around 4% and so my assessment ... ... [Read more]

  Hamaguchi Keiichiro, Research Director General, the Japan Institute for Labour Policy and Training   In recent years, the question “Why are Japanese wages not rising?” has become a hot topic. Five years have already passed since a book with the very title Hitodebusoku nanoni naze chingin ga agara nai no ka (Why Haven’t Wages Been Raised Even With a Labor Shortage?) (Genda Yuji ed., 2017) came out. The analysis from various economic perspectives developed there may seem like it makes sense, but it really doesn’t sound right. In the past, during the period of high economic growth, Japanese wages rose sharply, spurred on by the “income-doubling plan.” Prices also rose, but wage growth was even larger. When did that change? Let’s look back at history. The oil crisis success backfired The first change came with the wage suppression in the spring wage negotiations ... ... [Read more]

  What is the essence of Inamori Kazuo’s Management Philosophy? Prof. Nonaka Ikujiro, a global authority in organizational management and a research advisor at the Ritsumeikan Inamori Philosophy Research Center, shares his perspective.   Nonaka Ikujiro, Professor Emeritus, Hitotsubashi University A manager who recognized the importance of “empathy” Japan’s knowledge power used to be unsurpassed in the world. However, it has become sluggish, especially in the last 30 years. I believe that the key to its revival lies in a “humanizing strategy,” meaning a “humanity-centric” strategy based on empathy, and this was something brilliantly put into practice in the management philosophy of Inamori Kazuo (1932–2022), who regrettably passed away on August 24, 2022. One typical theory of strategy is Michael Porter’s theory of competitive strategy. The method starts by analyzing the structure of the market to compose corporate strategy. This scientific and analytical strategy ... ... [Read more]

  Hayakawa Hideo, Senior Fellow, Tokyo Foundation for Policy Research   Some three years ago, much of the developed world had joined Japan, succumbing to Japanification, a term used to describe a combination of low growth, low inflation, and low interest rates. However, the COVID pandemic completely transformed the global economic landscape. Now, the biggest economic challenge facing the world is rising inflation, and central banks around the world are rushing to tighten monetary policy to quell inflation, with the Federal Reserve Board (FRB) leading the charge. Japan has also seen growing discontent with the rising cost of living, as consumer inflation (the rate of increase in the consumer price index [CPI]) hit 3 percent for the first time in three decades and the yen weakened dramatically. Calls for the Bank of Japan (BOJ) to raise interest rates are also not uncommon.    However, the important ... ... [Read more]