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Economy, No.50  Oct. 25, 2018

Harmful impact of US import restrictions (I) : Contagion to other trade items, retaliation by trade partners, hindering revitalization of domestic industries

Key Points Steel protection a burden on user industries that will end in job losses Excess production capacity of Chinese state-owned enterprises (SOEs) a cause of friction Non-market measures under multilateral rules should be removed Arguing that steel and aluminum imports were harming the national security of the United States by weakening domestic industries, the Trump Administration has raised import tariffs under Section 232 of the Trade Expansion Act of 1962. These unilateral import restrictions outside the framework of World Trade Organization (WTO) rules threaten to spark a potential trade war, while protection of steel and aluminum industries from the pressures of international competition risks adversely affecting the economy and jobs. In this article I would like to consider the present status of trade policy and the problems associated with import restrictions in light of the unique nature of the steel and aluminum industries. ... ... [Read more]

Economy, No.50  Oct. 16, 2018

Points of Discussion Concerning the Strategic Energy Plan I: The nuclear power replacement strategy

< Key Points > Fifty years from now, no operational nuclear power reactors in Japan Postponements by politicians and bureaucrats have resulted in an absence of nuclear strategy and playmakers Deferred development of less toxic reactors to replace Monju The Basic Energy Plan is revised every four years with the fifth plan about to be approved by Cabinet decision. Based on the Basic Act on Energy Policy enacted in 2002, the Basic Energy Plan indicates the guiding principles for Japan’s medium and long-term energy policy. The first plan was formulated in 2003. Since then, the plan has been revised at intervals of three to four years. The fourth plan was formulated in 2014 as a result of the first reforms in the wake of the accident at the TEPCO Fukushima Daiichi Nuclear Power Plant in 2011.     As a result, the Long-Term Energy Demand and ... ... [Read more]

Economy, No.49  Sept. 2, 2018

Can we learn from history, or do we simply repeat history?—Trump’s trade policy from an economics perspective

When similar events occur In his book Manias, Panics, and Crashes: A History of Financial Crisis, C. P. Kindleberger, the economic historian who analyzed the history of financial crises, adopts quite a gloomy historical perspective on the interactions between economic systems and people. Bubbles occur when mania (hyper-optimism) becomes prevalent in society. However, bubbles will burst at some point, causing panic and, in the end, plunging economic systems into collapse and panic. Have we not been through these processes any number of times in the modern era? Such hyper-optimism suggests a social climate where the prevalent economic behavior is excitable, yet relaxed about reckless borrowing and lending, believing all will be well. The pattern of manias, panics, and crashes applies unchanged to the collapse of the bubble economy in Japan in the late 1980s, the United States at the time of the Lehman Brothers ... ... [Read more]

Economy, No.48  Aug. 16, 2018

Prospects for the RCEP Negotiations: Protecting the Liberal Economic Order

Key Points: Diverse frameworks are competing to lead the regional order RCEP increasingly important due to US withdrawal from the TPP Concerns that Belt and Road Initiative (BRI) is inconsistent with the liberal order The Regional Comprehensive Economic Partnership (RCEP) is an initiative targeting aspects of regional economic integration between the Association of South-East Asian Nations (ASEAN) and the six countries that already have free trade agreements (FTA) with the ASEAN (Japan, China, Korea, India, Australia and New Zealand). Formally declared open in 2012, the ongoing negotiations aim to establish the rules for eighteen areas including goods, services, investment, rules of origin, intellectual property, competition, and dispute settlement. One of the points in favor of the RCEP is that the members include China and India as well as all ten ASEAN countries. Only four of the ASEAN countries participate in the Trans-Pacific Partnership (TPP) ... ... [Read more]

Economy, No.48  Aug. 16, 2018

Prospects for the RCEP Negotiations: Japan and ASEAN Are Key to a Conclusion Within the Year

  Key Points: Implementing the RCEP would greatly benefit the global economy. Deter protectionism together with the TPP and the Japan-EU EPA Transitional measures and capacity-building support the negotiation conclusion   On July 1, Tokyo hosted a ministerial meeting of the Regional Comprehensive Economic Partnership (RCEP). This was the first ministerial meeting to be held outside the Association of Southeast Asian Nations (ASEAN). RCEP is a supra-regional economic area (a mega free trade agreement) in East Asia, the center of global economic growth. The sixteen nations participating in the negotiations account for about half of the world’s population (3.4 billion) while the GDP (about USD 20 trillion) and total trade (about USD 10 trillion) account for one third globally. If the agreement is implemented, it will have a substantial and positive impact on both the East Asian and the global economy. Regional cooperation in ... ... [Read more]

Economy, No.47  Jun. 21, 2018

The Durability of Abenomics: Seeds of Present Gains Sown in First Abe Administration

Professor Doi Takero of Keio University speaks with Ito Takatoshi, former Vice Minister of Finance for International Affairs and Private Sector Member of the Council on Economic and Fiscal Policy. View of Current Situation Doi Takero: Five years have passed since the second Abe Cabinet initiated “Abenomics.” A diversity of views have been offered about whether any benefits have resulted from this policy package, but I wonder if you could tell us succinctly how this set of fiscal and monetary policies that go under the general name of Abenomics came into being in the first place, including what they imply for today? Ito Takatoshi: I see. I’ll try to be concise. Doi: No need to say that [laughs]. So, the key posts at the Bank of Japan have been determined, and the decision has been made for Governor Kuroda Haruhiko to continue serving. So ... ... [Read more]

Economy, No.47  Jun. 19, 2018

Asia’s Growth and Japan I: Turning the world’s factory into a center for technological innovation

East Asia has achieved sustainable economic growth by forming Factory Asia, linked through supply chains across nations. The growth of East Asia also brought significant benefits to Japan by generating demand. Over the past quarter-century, real income per capita increased 3.2-fold in East Asia, and exports from Japan to East Asia expanded 3.7 times. In recent years, nearly 10% of Japan’s income has been attributable to exports to East Asia. However, the Asian growth has slowed down lately. China’s real economic growth declined from around 10% in the 2000s to below 8% in the 2010s. Emerging economies in East Asia—such as Malaysia, Thailand, and Indonesia—have been growing at an annual rate of 3% to 5% in recent years, stopping short of serving as a robust growth engine for the region. With rapid population aging expected to occur in many countries in the region, it ... ... [Read more]

Economy, No.47  Jun. 15, 2018

Asia’s Growth and Japan II: Large Cities Enjoy the Benefits of the Demographic Bonus

Key Points: Shanghai’s per capita GDP is equal to those of high-income countries. The percentage of young people in large cities is higher than at the country level. There are concerns about the acceleration of population aging in the regional areas and agricultural villages in the near future. The future of the economies of East Asia (China, Asian Newly Industrializing Economies (NIEs) and the Association of Southeast Asian Nations (ASEAN)) depends on the cities. Back in 1950, the percentage of urbanization (the rate of the urban population to the total population) in East Asia was just 17%, well below the global average of 30%. At that time, cities were exceptional areas in East Asia. The percentage of urbanization subsequently rose rapidly, however; it surpassed 50% in 2010 and hit 57% in 2015, exceeding the global average of 54%. East Asia shifted from a rural ... ... [Read more]

Economy, No.47  Jun. 12, 2018

Asia’s Growth and Japan III: Understanding the Values Attached Locally is the Key

Key Points: A proper understanding of Asian markets is indispensable for building strategies. Values related to consumption vary from one region to another. Look for the key to adjustment to local conditions in visitors from abroad. Japanese companies’ forays into overseas markets are heating up. According to the 2017 edition of Kaigai shinshutsu kigyo soran (Source Book on Japanese Companies Expanding Operations Overseas, published by Toyo Keizai Inc.), the highest ratio of companies establishing subsidiaries abroad, 30% of surveyed firms, cited overseas market development as the objective for establishing them. Companies with subsidiaries in Asia comprised 72% of them. Asia is attracting attention to this extent. Naturally, we see many companies advancing into Asian markets to develop an overseas production network. However, we should not forget that many of the overseas manufacturing plants that those companies have established in recent years are meant for ... ... [Read more]

Economy, No.47  Jun. 9, 2018

Agenda for BOJ Governor in Second Term II: Further commitment to do whatever it takes to achieve 2% inflation target entails a risk—It is important to return to the principles of the “joint statement.”

Key Points: Inconsistent priorities have made monetary policy inflexible. The 2013 joint statement called for the establishment of a sustainable fiscal structure. A widening disparity between BOJ’s words and actual intentions appears to involve a risk. The Bank of Japan (BOJ) has demonstrated its unwavering dedication to the achievement of a 2% inflation target over the last five years. In his inaugural news conference held five years ago, Governor Kuroda Haruhiko referred to the joint statement announced by the government and the BOJ in January 2013 by saying, “It can be summed up as we will do whatever it takes to achieve 2% inflation at the earliest date possible.” Deputy Governor Iwata Kikuo also expressed his strong commitment to achieving the price stability target no matter what the situation would be by saying, “We should not make excuses by saying that it wasn’t our ... ... [Read more]