Ⅰ. Introduction The Japanese government raised the consumption tax rate to 10% in October 2019. Many people have criticized such tax increases, citing them as a cause of an economic downturn. However, the tax hike resulted from an increase in social security expenses associated with the aging of the Japanese population. Another source of revenue would have been sought or the control of benefits would have been requested if the consumption tax was not picked as a solution. In fact, social security benefits will expand from the current level of 120 trillion yen (the figure for fiscal 2018) to 190 trillion yen in fiscal 2040, according to a trial calculation performed by the Cabinet Office. Such an increase in social security expenses is due to the structural problem in twenty-first-century Japan called aging. It will not be all right when the economy picks up. ... ... [Read more]

  While this agreement can be assessed as “a deal where both sides gained benefits,” Japan has already used up the beef and pork card, which means that the “second stage” of the negotiations would likely be more severe.   The Japan-US trade negotiations that started in April 2019 reached an agreement at the Japan-US summit on September 25 and the Japanese and US governments signed the Japan-US Trade Agreement and the Japan-US Digital Trade Agreement on October 7. Because the agreements needed no approval from the Congress of the United States, they went into force on January 1, 2020, after they were approved at the 200th Extraordinary Session of the Diet underway in Japan. Because no new legislative or budgetary measures were needed for the implementation of the agreements in Japan, there are no related bills. The Japan-US Digital Trade Agreement is “TPP-plus” ... ... [Read more]

Key points: The government outlook is premised on growth, with some uncertainty. Distinguish between risk dispersion and redistribution functions Intensively direct public funds to those in desperate need The consumption tax rate has been raised to 10%, marking the end of the comprehensive reform of social security and taxation systems that started in the mid-2000s. But we face the 2025 problem of the baby boomers reaching the age of 75 and social security reform is now entering a crucial stage. As poverty grows amid slower economic growth and depopulation and population aging begin deepening in earnest, politicians are now expected to reconstruct sustainable social security; that is, to carry out sweeping reforms to facilitate the balance between social security benefits and contributions. The starting point for the fiscal reform debates is the May 2018 paper, “The Projections for the Future of Social Security with ... ... [Read more]

Key points: Virtually sealed off the imposition of additional tariffs on automobiles Digital trade rules to be applied to the Japan-US Trade Agreement in advance Persuade the US to return to the TPP On October 7, the Japan and the US governments signed the Trade Agreement between Japan and the United States of America (Japan-US Trade Agreement) and the Agreement between Japan and the United States of America concerning Digital Trade (Japan-US Digital Trade Agreement). One year since the agreement on the start of negotiations in the Japan-US joint statement announced on September 26, 2018, and half a year since the start of substantive negotiations in April 2019, they have concluded the following. In the Japan-US Trade Agreement, Japan responded to the US demand for the liberalization of agricultural products, including beef, while negotiations will continue on the US’ elimination of tariffs on automobiles ... ... [Read more]

Key points: Decreased expectations for the effects of unconventional monetary easing policy Monetary easing is used as an alternative to appropriate policy measures Wise spending should be emphasized in expanding fiscal policy Up until 2018, a lot of attention was focused on an exit from monetary easing. The situation completely changed in 2019, when the Federal Reserve Board (FRB) lowered interest rates three times starting in August and the European Central Bank (ECB) decided in September on additional monetary easing, including the further lowering of already negative interest rates. Financial markets are caught up in the atmosphere of global monetary easing. Now, however, we are in a different environment than in 2010 to 2012, when unconventional monetary easing policies were implemented all around the world. Quite a few economists and economic analysts have a critical view of the recent monetary easing. First, developed countries ... ... [Read more]

Political calculation and media resonance Japan-ROK relations have become more complicated than necessary　over the export control issue. First of all, let me get into the　background of this issue. It started from a press release from the Ministry of Economy, Trade and Industry (METI) on July 1, titled “Update of METI’s licensing policies and procedures on exports of controlled items to the Republic of Korea (ROK).” The title actually just said, “[the Ministry] will apply updated licensing policies and procedures.” But media reports immediately after the press release gave sensational and stirring headlines saying “Embargo,” “Implementation of export restrictions” and “Countermeasure.” Media reports have just recently changed their language to “Strict implementation of export controls” and “Removal of the ROK from ‘White List.’” But how much time did it take? Some media reports have continued to persistently use the word export restriction, though. What do ... ... [Read more]

Japanese companies continue to face tough battles in the face of waves of globalization and digitalization. In particular, Japan is said to trail the pack in AI-related technology. When Japanese companies are compared to others around the world, a miserable situation is often recorded. Turning our attention to within Japan however, today there are actually 34,394 “historic companies” that were founded 100 or more years ago (according to a 2017 study by Tokyo Shoko Research). Some researchers put the number at over ten thousand — notably more than in other countries around the world. In 2019, famous examples were Nintendo (over 130 years old), Morinaga (over 120 years), Olympus and NGK Insulators (both over 100 years). The oldest company in the world is an Osaka shrine and temple construction firm called Kongo Gumi. It was founded in 578 during the Asuka period. The oldest ... ... [Read more]

Key points Economic policy should return to an orthodox type from an emergency type The government should aim to increase worker productivity The opposition parties should also make responsible proposals regarding the consumption tax and pension   The Upper House election is over. The result of the election does not directly place the Abe administration under pressure to make revisions to its economic policy. On this occasion, however, I would like to point out three basic directions required for the economic policy in the years to come based on challenges taken on before the election and discussions held by the political parties during the election. The first direction is to return the experimental and venturous economic policy, enacted in an emergency, to an orthodox policy for normal times. For about thirty years following the burst of the bubble, the Japanese economy faced uncharted challenges ... ... [Read more]

  Key Points Set a permissible range of 1% over or under the 2% inflation rate target Take measures for banks when deepening the degree of negative interest rates It is necessary to improve labor mobility and raise wages for young workers Six and a half years have now passed since the second Abe administration was established in December 2012. Continued economic expansion has led to a remarkable improvement in the employment situation. Although people reportedly do not have feel that their income has increased, the overall growth rate is above 1% despite the decreasing working-age population and the aging society. The effect of the radical quantitative and qualitative easing has kept the average inflation rate positive, at slightly under 1%. Some are critical, however. To put it plainly, Abenomics, which entered its seventh year with continued strong market conditions, has led to a ... ... [Read more]

As institutions prepare for the release of new banknotes in 2024, the principles and ideas of Shibusawa Eiichi, the pioneer of modern banking in Japan some 150 years before, ring as true as ever. When the Bank of Japan reissues its banknotes in 2024, the 10,000-yen note will feature a portrait of Shibusawa Eiichi (1840–1931), “the father of modern Japanese capitalism.” In locations with deep associations to Shibusawa, such as his birthplace of Fukaya City in Saitama Prefecture, everyone is delighted. The Shibusawa Memorial Museum meanwhile is receiving many visitors. According to Inoue Jun, director of the Museum, many inquiries have also been received from media and other organizations. “It is a very good opportunity for people to find out who Shibusawa is,” Inoue says. “People will learn that he is very much alive in this paradigm shifting era.” (The Shibusawa Memorial Museum will ... ... [Read more]