Takeo Hoshi, Professor, University of Tokyo   Key points Staying afloat with support despite no hope for performance recovery Hurting the profitability of healthy firms and the economy as a whole Urgent need for policy shift to protect employment rather than firms   When the main character Barbara and her brother visit their father’s grave in the cemetery, an unknown man approaches them with clumsy steps from afar. This is the first scene where a zombie appears in the Night of the Living Dead (1968), which is credited with inventing the zombie movie genre. There are firms that perform badly and have little hope of recovery but that are kept afloat with support from creditors and the government, negatively affecting other firms and stagnating the economy. Likening this to zombie movies, Ricardo J. Caballero, Professor at Massachusetts Institute of Technology, and Anil K. Kashyap, ... ... [Read more]

Ida Takanori, Professor at the Graduate School of Economics, Kyoto University   Key points The pessimism bias is stronger in Japanese people than in British people People who have pessimism bias understand the need for self-restraint Education needs to target young men and other groups at high risk of infection   More than a year since the outbreak of the pandemic, the COVID-19 catastrophe has still not abated. Coronavirus is not the only thing that has become prevalent. The academic term “behavior change,” used in the behavioral sciences, has unexpectedly come into widespread use. Behavioral economics considers human rationality to be limited and cognition to be subject to biases, placing emphasis on “nudge” as a means of changing behavior for the better. A declaration of a state of emergency issued in some areas on April 7, 2020, asked citizens to refrain from leaving the ... ... [Read more]

Tomiura Eiichi, Faculty Fellow and Program Director at the Research Institute of Economy, Trade and Industry (RIETI), Professor at the Faculty of Economics, Hitotsubashi University   It is difficult to grasp the whole picture of a cross-border supply chain based on publicly available statistics. However, according to a list of suppliers (e.g., parts manufacturers) disclosed by Apple Inc., for example, the supply chain for the company’s products extends across as many as 30 countries/regions. In addition to “snake”-type supply chains, under which long lines of production processes are located across many countries, there are “spider”-type ones, under which intermediate goods are collected from suppliers in many countries. This classification of supply chains was proposed by Richard Baldwin of the Graduate Institute of International Studies, Geneva, and Anthony Venables of Oxford University in the United Kingdom. Many countries have enjoyed the merits of combining the ... ... [Read more]

Kikkawa Takeo, Vice President, Professor, Graduate School of International Management, International University of Japan   The confusion caused by the new reduction targets Prime Minister Suga Yoshihide announced a policy of realizing carbon neutrality and reducing Japanese greenhouse gas emissions to a “net zero” by 2050 in his policy speech immediately after his inauguration on October 26, 2020. He also presented the target of reducing greenhouse gas emissions by 46% by FY2030 compared with FY2013 at the Leaders Summit on Climate, hosted by US President Joseph R. Biden, Jr. on April 22, 2021. This new target of a 46% reduction is a considerable upward adjustment of the previous target. At COP21 (The 21st Conference of the Parties to the United Nations Framework Convention on Climate Change), which adopted the Paris Agreement in 2015, the Japanese government made the international commitment to “reduce greenhouse gas ... ... [Read more]

Okina Yuri, Executive Vice President, Nippon Institute for Research Advancement (NIRA), Chairperson, The Japan Research Institute, Limited   Abstract In 2020, the world economy was struck by the unprecedented crisis of the COVID-19 pandemic. Japan’s response to the pandemic has been comparatively successful when considered from an international perspective, and has reduced the nation’s mortality rate. At the same time, it must be said that it has also highlighted serious structural issues in Japanese society. Based on an international comparison, the most important issues to be addressed can be seen to include comprehensive review of the system of medical care and the cultivation of readiness for emergency responses. In addition, the important issues from the perspective of ensuring economic security are the enhancement of vaccine development, flexible responses with regard to the various regulations associated with vaccination, and focused and flexible government expenditure with ... ... [Read more]

Kojima Akira, Member, Board of Trustees, and Adjunct Professor, National Graduate Institute for Policy Studies (GRIPS)   The Novel Coronavirus (COVID-19) was detected in Wuhan, Hubei Province, China at the end of December 2019. In January 2020, cases of infections were confirmed in Japan, and the pandemic intensified as the infection spread rapidly around the world. The subsequent Great Lockdown, to quote the International Monetary Fund (IMF), has plunged the global economy into the worst recession since the Great Depression in the 1930s, creating disparities between countries, types of industry, and social classes. In 2020, the growth rate for the global economy slumped to negative 3.3%. The widening disparity has also drawn attention to how economies and societies have started to develop in the shape of a K, i.e., polarizing into areas of growth and expansion, and areas of downturn and decline. The coronavirus ... ... [Read more]

Ito Takatoshi, Professor at Columbia University, Adjunct Professor at the National Graduate Institute for Policy Studies (GRIPS)   Key points As the economy recovers, the United States moves toward a rise in long-term interest rates Stock price gaps between types of industry suggest market rationality Central bank to communicate carefully with stock markets   One year has passed since the start of restrictions on economic activities in Japan, the United States, and Europe to control the COVID-19 pandemic. The economy has sustained major damage as a result of the declarations of a state of emergency and lockdowns, the unemployment rates have risen and consumption in some sectors remains weak. GDP in both Japan and the United States has dropped by nearly 10% from the most recent peak in the second quarter of 2020. In the near term, the trend is toward a recovery but ... ... [Read more]

Yoshikawa Hiroshi, President, Rissho University The Current COVID-19 Pandemic The current state of the Japanese economy is at a postwar low point not just in Japan but across the world due to the spread of COVID-19 since early 2020, and this is our biggest problem at present. On top of the normal influenza in winter, the spread of a third wave is feared in Japan. What will happen to the Japanese economy amid that? The second quarter of April through June, 2020 showed -28.1 points (second preliminary estimate), the lowest in the postwar period. This was a dramatic drop even in comparison to the Lehman Shock. A major factor here is the drop in consumption. About 60% of Japan’s GDP of some 500 trillion yen is consumption. At the very heart of the economy lies household and personal consumption. Consumption is stable compared to ... ... [Read more]

Iwaisako Tokuo, Professor, Hitotsubashi University   Key points Both household savings and current account balances are gradually moving into the red The rates of return on assets are not expected to rise after the COVID-19 pandemic Economic policy focuses on measures to improve the productivity of workers   From a macroeconomic perspective, there has been surprisingly little change in the circumstances surrounding Japanese household financial assets in the past quarter-century. To start with, household savings rates dropped sharply at the beginning of twenty-first century. This prompted an outcry among economists about the arrival of the “zero-saving society”, backed by the simulation studies predicting negative household savings and the current account deficit (= negative national savings). But by the mid-2000s, saving rates had stabilized at a low level and the situation has remained nearly unchanged since then.  In economics, annual savings is a flow variable, ... ... [Read more]

Fujimoto Takahiro, Professor, Graduate School of Economics and Manufacturing Management Research Center, University of Tokyo   Key points Issues include sustainability, digitalization and internationalization The discourse around the decline in the Japanese manufacturing industry and the praise for EVs is superficial The challenges are intertwined in complicated ways and Japanese industry is evolving   What kind of age will the 2020s be in the evolution of industry? The decade began with the global COVID-19 pandemic, the effects of which are certain to be prolonged, but the long-term industrial phenomena include measures to counter global warming, a series of floods and earthquakes, digitalization, US-China friction, and a shrinking real economy at a time of infections. To complicate matters, these issues are interlinked in complex ways. We live in complicated times in the true sense. These issues can be summed up as S for sustainability=crisis, D ... ... [Read more]