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No.47
Economy, No.47  Jun. 4, 2018

Agenda for BOJ Governor in Second Term I: Japan’s Deflation Is Almost Fixed but Needs Some Modifications—No Further Reflationary Policy Required

Key Points: Avoid real wages falling amid inflation targeting Improve messaging and reduce purchases of exchange-traded funds (ETFs) Further monetary easing policy may face criticism from abroad It has been five years since Kuroda Haruhiko was inaugurated as governor of the Bank of Japan (BOJ). The government has nominated Mr. Kuroda for a second term. Mr. Kuroda’s nomination was among those submitted to the Diet, which included nominations for two new deputy governors for the bank. In this article, I intend to review the BOJ’s monetary policy over the past five years and point out challenges confronting Japan’s central bank, which will be led by the reappointed governor. BOJ Governor Haruhiko Kuroda launched a dramatic monetary policy aimed at achieving a 2% inflation rate, introducing quantitative and qualitative monetary easing (QQE) soon after he came on board in April 2013. The BOJ announced the ... ... [Read more]

No.47
Economy, No.47  May. 27, 2018

Leverage Longer Lifespans to Boost Growth: Japan Center for Economic Research Medium-Term Economic Forecast — Build working-senior friendly society

Points: Japanese economic growth rate set to slow under present circumstances Lifetime consumption rising with longer lifespans and working careers Boost consumption tax to 15% to provide for greater job diversity The Japanese economy continues to expand thanks to strong economies abroad. However, caution is still needed in assessing the medium-term economic outlook. In our Medium-Term Economic Forecast, we consider the relevant issues. World economic growth rates are rising in the short term, led by developed countries. The International Monetary Fund (IMF) revised in January their forecast a high of 3.9% world economic growth rate for 2018. Hidden in the backside, however, are a number of downside factors, and we believe that rates will slow over the medium term. The first factor is a structural one, namely the erosion of the United States potential growth rate, which gauges the long-term production capacity of the ... ... [Read more]

No.46
Economy, No.46  May. 21, 2018

HondaJet: Fulfilling the Dream of Soichiro

  As HondaJet continues its successful demonstration tour of Europe, Katayama Osamu looks back on the development of the aircraft, the fastest, highest-flying, quietest, and most fuel-efficient jet in its class. A red and white aircraft landed at Haneda Airport under a blue sky on 23 April 2015. It was a proud moment for HondaJet, whose development has been ongoing for approximately thirty years, since 1986. On the first day of its world tour en route to Japan and Europe, HondaJet made its first appearance outside the United States. At the commemorative press conference on the same day, the president of Honda Motor Co., Ito Takanobu, said, “Ever since its foundation, Honda has always had a dream of flying in the sky. Today, the dream that was held by the founder, Honda Soichiro, and the dream to enter the aircraft industry, thereby achieving three-dimensional mobility, have been ... ... [Read more]

No.46
Economy, No.46  May. 17, 2018

Interview: The Future of Digital Currencies

The fluctuations in the value of Bitcoin, an Internet digital currency, are becoming more and more rapid. People can use Bitcoin as money in an increasing number of shops, but is unstable Bitcoin a currency? In the modern age, the existence of currencies that were managed monopolistically by states has been shaken by technological progress. The Asahi Shimbun asked economist Iwai Katsuhito, who is known for his theory of money, about the relationships between digital currencies, central banks and states. After Bitcoin rose sharply to more than 2 million yen at the end of last year, from about 100,000 yen a year ago, it fell and showed volatile swings. Can we say that it is a new currency? Iwai Katsuhito: Since Bitcoin emerged in 2009, I have considered the possibility of it becoming a currency. But I have changed my mind in the last ... ... [Read more]

No.46
Economy, No.46  May. 11, 2018

Medical and Nursing Care Expenses and Social Security

After 2025, by when the baby-boomer generation will have turned 75, medical and nursing care expenses will be a severe issue. How should we construct an efficient system of benefits and payments? The author will describe the organization of the current system and measures for efficiency and consider a realistic solution. 1.Rapidly rising medical and nursing care expenses It is widely known that medical and nursing care expenses have been increasing along with the aging population. As we move closer to 2025, when the youngest baby-boomer will turn 75, we cannot find effective measures for rapidly rising medical and nursing care expenses. At the beginning of this discussion, the author will describe the organization of the current situation of medical and nursing care expenses. According to the “The Financial Statistics of Social Security in Japan ” published by the National Institute of Population and ... ... [Read more]

No.46
Economy, No.46  May. 1, 2018

Stalled Fiscal Consolidation:Private-Sector Financial Asset Surplus is Key

Key points: Private sector financial surplus can offset government financial deficit Domestic liquidity may be tight in second half of 2020s Long-term interest rates could rise before deficit in current account At a meeting of the Council on Economic and Fiscal Policy last January 23, the Cabinet Office announced its “Economic and Fiscal Projections for Medium to Long Term Analysis.” The projections show that, even if economic growth is achieved as targeted under its growth scenario, the government now projects that a surplus will not be achieved in the central and local government primary balance until the fiscal year ending March, 2028, or two years later than the last projection made in July, 2017. Debt repayment will be limited since a portion of the increased revenue from the October 2019 consumption tax hike will be allocated to childcare support, and total factor productivity (representing ... ... [Read more]

No.46
Economy, No.46  Apr. 6, 2018

Blueprint for the Future of Social Welfare (II) : Limiting State Responsibility to the Guaranteed Minimum

Key Points Japan has lagged behind in terms of human investment because of excessively expanded social insurance. Low-income earners are disadvantaged in terms of the social insurance burden and benefits. Reforms are needed that require middle- and high-income earners to make self-help efforts. The government has published the “New Economic Policy Package”, and drafted the fiscal 2018 Budget  including annual tax reforms, with human resource development as the central pillar. I do not object to this direction, but there has been little analysis and verification of problems in the existing system based on data and evidence. The burden will be forced on children who lack voting rights if the budget deficit increases to improve childcare and education. In this article, I will discuss the tasks and remedies for overcoming the declining birthrate and aging population. Human capital investment is a common issue in advanced ... ... [Read more]

No.46
Economy, No.46  Apr. 6, 2018

Blueprint for the Future of Social Welfare (I) : Social Security Cutting Across Policies, Public Finance and Employment

Key Points Policy switches in multiple fields have become an issue in advanced countries. The conversion of Japan’s social security systems to whole-generation social security produced results of a certain level. A future vision for a society to aim for should be clarified. The administration headed by Prime Minister Abe Shinzo has advanced support for women’s employment and working style reforms since 2015 under its slogan of promoting the dynamic engagement of all citizens. In December 2017, the Abe cabinet decided on a package of new economic policies and announced new measures for assisting with childcare and education in the name of human resources development in addition to measures collectively referred to as a productivity revolution. An outline of these measures is provided below. As measures for supporting childcare, the government will uniformly dispense with fees for using authorized facilities, such as kindergartens and ... ... [Read more]

No.45
Economy, No.45  Mar. 29, 2018

ICO: Dream or Nightmare?

The rise of digital currencies, including Bitcoin, causes us to predict the arrival of a new era. This is because the technology of blockchain, which constitutes the foundation of many digital currencies, is likely to prompt the emergence of completely new systems for investments and settlements of capital. However, it is undeniable that many of these systems still involve problems. Particularly alarming is capital procurement known as Initial Coin Offering (ICO), which uses the function of digital currencies called Ethereum. I will not provide a detailed explanation of what ICO is. But suppose that there is an imaginary ledger that is shared on the Internet using blockchain technology, and that the relationships of many rights and contract items are described there. Suppose that the rights corresponding to currencies are written there. In this situation, it would be possible to automatically move currency-based values in ... ... [Read more]

No.45
Economy, No.45  Mar. 29, 2018

Stalled Fiscal Consolidation: Government Must Act Soon on Policy Normalization

Key Points Japanese economy: Likely to slump after Tokyo Olympics Emergency Measures: Continuing through 2020s not possible Healthcare Insurance: Adopt funded individual savings account system This autumn Prime Minister Abe Shinzo is expected to decide whether or not to proceed with the 10% hike in the consumption tax rate, which is scheduled for October, 2019. During the House of Representatives election held in October of last year, the ruling party promised to allocate a portion of the revenue increase from the consumption tax hike to educational expenses, as by strengthening preschool education. Originally, 80% of the revenue increase was supposed to be allocated to paying down debt. But that would not benefit the younger working generation, and yet cutting social security spending to fund preschool education would be opposed by the elderly, so that’s not an option either. The government has secured a funding ... ... [Read more]