Following last December’s general election in Japan, a coalition government was formed by the Liberal Democratic Party and the New Komeito Party. LDP leader Shinzo Abe was elected as Japan’s prime minister to lead the coalition government. In his policy speech at the Diet (Japan’s national legislature) Jan. 28, 2013, he identified three major tasks for his government. They included revitalizing the Japanese economy, rebuilding after the Great East Japan Earthquake and reshaping Japan’s diplomatic and security environment. New policies pursuant to the stated goal of revitalizing the Japanese economy have attracted world-wide attention and will be the focus of my article.
The term “lost decades” is frequently used to describe the Japanese economy since the early 1990s when the bubble surrounding the stock market and the real-estate market burst. I have made no secret of the fact that I believe much of the negative commentary used to describe this period of Japanese economic history has been greatly exaggerated. While some industries clearly faltered, others were resilient and innovative and are flourishing, particularly in the area of science and technology, in a rapidly changing international economy. It should also be noted that even in these “lost decades,” there were 11 Japanese Nobel laureates in physics, chemistry and physiology/medicine. The New York Times described the excessive negativity as “The Myth of Japan’s Failure” (Jan. 8, 2012), noting, for example, that most analysis failed to take into account factors such as superior performances in socio-economic sectors. A comprehensive and unbiased evaluation of the overall performance of Japan’s economy over this period should temper the doom and gloom most commentators have used to describe this chapter in Japanese history.
Having said this, there is no denying Japanese economic growth has been low and we have experienced deflation for more than a decade. As a result of stagnated incomes, a new generation of Japanese workers is unable to fully enjoy the feeling of security and optimism that was taken for granted by their parents.
The Abe administration has attached the highest priority to ending persistent deflation and fostering growth. To that end, “Abe-nomics” will be characterized by the development and implementation of a three-pronged strategy consisting of aggressive monetary policy, flexible fiscal policy and a growth strategy that encourages private-sector investment. In implementing these measures, the Abe administration seeks to revitalize the economy by fostering sustained growth and creating more high-paying jobs.
The government and the Bank of Japan jointly unveiled a bold new monetary policy strategy on Jan. 22, with the bank setting a price-stability target of two percent, year-over-year change in the consumer price index. Just days earlier, on Jan. 11, the administration unveiled its Emergency Economic Measures for the Revitalization of the Japanese Economy to provide support for business activity, including the implementation of public works projects designed to accelerate post-quake/tsunami reconstruction and to strengthen the nation’s infrastructure. At the same time as it launched these emergency measures, the government has acknowledged the importance of pursuing fiscal sustainability in the medium- to long-term.
The government is determined to formulate and implement a growth strategy to strengthen the competitiveness of the Japanese economy, to overcome energy constraints and to enhance the innovation platform, while at the same time accelerating the removal of domestic institutional obstacles such as regulation. The Abe administration is planning to unveil its new growth strategy in mid-2013.
With regard to external economic policies, the government will continue to promote high-level economic partnerships, implement measures to secure energy and food, and encourage tourism and internal investment.
A clear commitment to these pro-growth policies by the Abe administration has already been reflected in financial markets, where share prices on the Tokyo Stock Exchange have begun to recover.
The main pillars of Japan-Canada relations are already focused on pro-growth areas such as the negotiation of high-level economic partnerships and the enhancement of bilateral co-operation in the field of science, technology and innovation. In a telephone conversation between Prime Minister Stephen Harper and Mr. Abe, which took place at the end of January, both leaders placed emphasis on the strong partnership that exists between Canada and Japan. In particular, they pledged to continue to work toward the conclusion of an economic partnership agreement.
In addition to economic ties, Japan and Canada have built a strong relationship in science and technology. One example is in the field of space co-operation. This was demonstrated by the significant collaboration at the International Space Station (ISS), when Japan’s unmanned transfer vehicle, Kounotori, launched by the Japanese rocket H-2B, successfully docked three times (to date) with the ISS to deliver food and other supplies — thanks in no small part to the Canadarm 2.
Other examples of bilateral collaboration in science and technology are nanotechnology and stem cell research. Both countries are leaders in these fields (Japanese scientist Shinya Yamanaka won a Nobel Prize in physiology/medicine for his stem cell work last year) and have held workshops and established a joint funding mechanism to promote future research.
The Abe administration has clearly indicated its determination to inject life into a struggling Japanese economy. It has taken short-term measures to stimulate growth and intends to introduce long-term structural changes in the months to come. Furthermore, all signs indicate that the new administration’s pro-growth philosophy with regard to external relations will do nothing but positively impact the vital bilateral relationship that currently exists between Canada and Japan.
