Wish You Create a New Generation of Challenge:Part(2) continued from Part(1)

Ⅲ. What can and should be done?

1. Covid19
 ーAggravated or prolonged infections due to policy mistakes
 ・In spite of progress of vaccination, the Covid19 infection does not seem to slow down  or converge as one might hope. There are at least two man-made problems.
・One is poor or mistaken management of policies, and the other is lack of help from Rich countries to poor countries.

・Outstanding example of mistaken policy actions is found in the case of Donald Trump who distrusted science and delayed the execution of relevant policies and aggravated infection dreadfully and consequently victimized American people worst in the world.
Jair Bolsonaro made a similar mistake in Brazil. Mr.Boris Johnson of UK made serious policy mistake at the early stage of spread resulting in largest casualties in Europe,

・The recent experience of Japan suffering from the fourth wave of infection may be the case of failed policies. Relying on relatively low cases and deaths and docile attitude of people, the government has been adopting only lukewarm policies and has failed to secure vaccines in time which may well prolong infections.
・In sharp contrast, Israel and Taiwan are the successful cases. They trust science and make use of it effectively to plan and execute anti-virus policy strategically.

ーLack of help from rich countries to poor countries
・Another issue is the lack of help from rich countries to poor countries.
・Rich countries secured vaccines and jabbed them early to prevent infection, while, poor countries cannot secure vaccines in addition to their poor hygiene conditions and deficient medical systems.
・Rich countries provide assistance to poor countries by international cooperation  such as COVAX sponsored by WHO. However the collected fund is mush too small relative to the needed amount.
・Failure to help poor countries will multiply the infections in poor countries and will feed back to the rest of the world.

ーWhat should be done
・To overcome Covid19 pandemic to minimize its damage, what we need to do are:
1. Use science, plan comprehensive and effective policies and execute Strategically,
2. Help poor countries and needy people to prevent the pandemic from magnified,
3. Respect the lives of people most and plan and execute policies accordingly.

2. Climate change
ーWhy plans to tackle climate change are insufficient
・The governments and industries are doing their best coping with reasonable economic growth hoping the growth will enable further technological progress.
・In contrast, the warming of atmosphere proceeds much faster than the pace of economic effort of expanding the policies and innovating technologies, thus the gap between what is needed and what is done enlarges.

ーWhat should be done
 ・We need to plan our policies from the viewpoint of what should be done to stop atmosphere warming rather than what can be done on economic and technological base.
・If we tackle the issue from the standpoint of what should be done, it may well accelerate technological progress vouched by necessary budgetary expansion.
・Critical is our recognition of the importance to protect the precious planet on which we live.

3. US-China hegemony confrontation
 ーDanger of de-coupling of the world economy
・US-China hegemony confrontation is dangerous and destructive at least in the sense that it will lead to de-coupling of the world economy.
・As in the case of high tech industry, the US tries to exclude Chinese major high tech. firms, such as Huawei Technology out of the world market by shutting out supplies and  purchases.
・China retaliates by developing its self-contained industrial bloc to assure the survival of Chinese economic bloc, thus the world economy will be de-coupled.
・De-coupling of the economy will inevitably shrink the world economy because of cutting off international supply chains which victimizes other countries and peoples in the world.

ーWhat drives hegemony
・Professor Graham Allison of Harvard university analyzes the US-China confrontation today is a contemporary case of hegemony war, which has been repeated in the world history since the case of Athens and Sparta hegemony war in an ancient time.
・Why people seek for hegemony. There may be two major reasons. One is instinctive desire of people to obtain power to control others, and the other is exclusion of  heterogeneous entity.
・The US has been monopolizing the overwhelming power to control the world since WWII and wants to perpetuate the position by eliminating competitors.
・The US believes in “democracy,” and wishes to exclude heterogenous country such as China which US regards “socialist autarchy.”

 ーWhat should be done
・Although pursuit for hegemony has been instinctive desire in the world history for a long time, it should be outdated in today’s world and it is dangerous because it may well lead to actual war and harm or destruct the world.
・Exclusion of heterogeneous competitors stems from narrow sightedness of people and leaders who do not understand different histories, cultures and values of other nations and people.
・Recognition of obsolescence of hegemony and broader understanding of  heterogeneity of the world may be the virtue we may have to look for future generations.


4. Economic and social differentials
  ーWhat should be done
 ・Increases of economic and social differentials reflect a complex of many diverse reasons, and the differentials in turn give rise to many serious problems of contemporary world such as political turmoils, spread of CV pandemic and  Worsening of climate change etc.
・To minimize the enlargement of differentials and the problems caused by large differentials, most critical is our mindset of respecting diversity of people and The sense of inclusion of heterogeneous diversity.


5. What are required to resolve issues of contemporary world?
・Covid19:respect lives of people and plan and execute needed policies strategically
・Climate change: keen recognition to protect precious and vulnerable planet
・Global confrontation: awareness of obsolescence of hegemony, Respect history and heterogeneous cultures of diverse world.
・Differentials: respect diversity of people and the sense of inclusion of diversity


Ⅳ. Great Potential Roles of Young Generation
 ・Many of listeners of today belong to so called “Generation Z” who have been born during the period of 1990s and 2000s; namely, age between teenagers to early thirties.
・You have outstanding characteristics which preceding generations to not have.
・You have outstanding potentials to change the society for the future.

・To tacle the difficult problems of contemporary world, which we discssed at length and in detal so fa and to build a better society for the future, I look forward to the great  potentials of young generation. I would like to mention 3 of such potentials.

1. A generation of new communication technologies
・You were born in the era when information communication technology has developed remarkably.
・Since many of you have grown playing with mobile terminals such as i-phones or I- pads, sending and exchanging information is part of your life.
・You are born netizens, or citizens equipped with technology of networking.
・By networking with each other you become a member of an integrated human  community of the world.
・This is an outstanding feature of your generation and your strength.

2. A generation being aware of limitation of the planet
・You are the generation grown witnessing many disastrous hazards on the earth, much more so than previous generations.
・You must have seen destructive typhoons, abnormal heavy rains, floods, forest fires, and particularly in Japan, huge and violent earthquakes and subsequent Tsumani.
・You must have seen and heard by media even more serious hazards like draughts, large  scale wild fire, sinking of low level islands in the sea, which previous generations have seldom experienced.
・This is because much of these natural hazards have been aggravated by so-called “greenhouse effect, namely, warming the atmosphere temperature, which has been  accelerating recently.
・The planet we live looks a beautiful blue planet in the view of astronauts.
・The planet as beautiful as this is perhaps the only one in this entire universe.
・The unique beauty, safety and comfort of this earth is assured only by very thin atmosphere and clean ocean covering the globe.
・This thin film of air and water is being polluted by greenhouse gas emission of ever expanding industrial activities.
・Since young generation has been witnessing horrendous hazards and environmental degradation of this precious and vulnerable film of the earth, you are more keenly aware and worried about the climate change than preceding generations.


3. A generation bound to think of global human community
・Being aware of the limitation of the planet and familiar and equipped with advanced  communication technologies, each one of you can raise your voice against problems of the world and mobilize a movement to change the society.
・Greta Thunberg was only a 16 year old Swedish student when she raised her voice to criticize the flaws of climate policies of the world. Thanks to social networking  media, many millions of people now listen to what she saids and try to work together.
・In this sense, your generation has a tremendous potential to change the world to  secure better life for the human race.


Ⅵ. Tasks and Hopes for the Generation of New Historical Stage

1. Lessons we can learn from Japan’s historical predecessors

・Since I think most of listeners of my speech are young Japanese, let me quote a couple  of precious experience of Japanese historical predecessors who changed the history of our country and the world.
・One was the Meiji restoration and the other is the post war recovery and development as a global economic power.

ーThe Meiji Restoration
・Prior to Meiji restoration, Japan was reined by well structured feudal Tokugawa Government.
・Thanks to the well designed and rigorous government under seclusion policy, Japan  enjoyed 260 years of peaceful and stable era.
・On the other hand, Japan was left behind the global development of technology.
・People were shocked when black fleet of Commodore Perry visited Japan and urged  Japan to open the country.
・Young low class Samurais and enlightened farmers in Southern clans organized the  movement and toppled the Tokugawa government, which they deemed imperative to transform the feudal Japan to a modern country.
・Within a few decades they build the new government which made Japan a modern Industrial country.

ーPost WWII Recovery and Miraculous Economic Development
・Japan was beaten in the Pacific War against the US, and was occupied for the first time in Japan’s 2000 year history of civilization.
・The 6 years of occupation by the foreign soldiers was incredible hardship.
・However, only twenty years after the occupation, Japan resurrected as an economic  power in the world, which caught the attention of international community as  “Japan’s economic miracle.”
・There are many hypotheses as to why and how Japan managed to do it.
・Having studied in depth, I arrived at a conclusion that this recovery and remarkeble  development of Japan has been realized chiefly tremendous effort made by young  entrepreneurs such as Matsushita Konosuke of Matsushita Electric Mfg, Toyoda
Kiichiro of TOYOTA,Ibuka Masaru and Morita Akio of SONY and Honda Soichiro of HONDA.

・I hope young Japanese students spend some time to study such events of Japanese contemporary history and get some insights and courage from the experiences of  our predecessors.

2. Take advantage of Covid19 experience to create the new world
・History tells us, large scale epidemic has had profound impact to human society.

ーPest in 15th century
・Pest in 15th century gave huge damage to Medieval Europe.
・One third of population is said to have died because of Pest infection.
・Since most of the victims were working class people, feudal manors lost many of their serfs.
・ Lords of manors were obliged to pay wages to serfs to attract labor force.
・This undermined the basic structure of feudal system and finally gave rise to transition from medieval era to early modern era.
・Another impact was the decline of power of Catholic church.
・During the deadly pandemic, people realized that church was unable to save lives of people in spite of their claimed authority and accumulated huge assets.
・A German theologist, Martin Luther sharply attacked the deception of Catholic  Church, and later led the movement of Protestantism, which also helped change the  history toward modern era.

ーSpanish Flu in the early 20th century
・Another major experience was “Spanish Flu” which victimized the world about 100 years ago.
・Due to three major waves of pandemic, 40 million people lost their lives.
・Witnessing so many people of low income class suffered and died, a new thought of revised capitalism was proposed in Britain, democracy prevailed in Japan for sometime, Russin revolution took place.
・Such stream of social change was unfortunately overwhelmed by imperialism which led The world into WWII.

ーOpportunities unfolding with the impact of Covid19
・Covid19 is a major pandemic which has a historic and broad impact to our society
・In order to avoid infection, people try to keep social distance and not to get together nor move around.
・This did and will change the styles of work and life of people.
・People work as much as possible by remote communication. People live sparsely. These change of styles of work and life will change structure of cities and landscape.
・Taking advantage of these social changes, information and communication industries develop tremendously.
・Development of information industry, pushed by pervasive impacts of pandemic, may well change not only the styles of work and life, industry, cities and land of the county.

3. Solve old issues with new thoughts and create a new world

ーSolve old issues with new thoughts
・I hope the young generation, with gifted potentials, alert senses to be aware of pressing issues which they face, will challenge to tackle and solve the old issues by their fresh
thoughts and new technologies.

ーCreate an entirely new world on this planet
・Not only that, I hope the young generation, taking advantage of this rare opportunity, to challenge to create an entirely new society with new ideas, thoughts, norma, rules and even beliefs, just as Pest pandemic in 15th century changed the medieval
feudalistic era by opening the doors for the forthcoming modern era, to provide opportunities for diverse and heterogeneous people to live together peacefully cherishing this precious planet.

4. Pursue your career with a broad perspective and deep thinking
・You may be studying at university, may be working as a business person, may serve the government, may run a shop, may engage in a variety of occupations.
・No matter what you do, I think it is essentially important for you always to have a broad perspective to know what’s going on in the world and understand their meanings by deep thinking.
・This is because everyone of you are very important and critical existence of our global human community which is tied together closely by our communication technology.

・Let me conclude my lecture by wishing you a wonderful life for the future.

・Thank you.

Wish You Create a New Generation of Challenge:Part(1)

This is the manuscript of my lecture prepared for a Webinar lecture series entitled “Global Cultural Program” which is promoted by Tokyo Metropolitan Government as its campaign of “Internationalization of Tokyo.”

The program is to ask some globally eminent speakers such as Mr. Jacques Attali, famous French thinker of social and economic issues, Mr. Audrey Tang, ingenious information minister of Taiwan government, and Ms. Linda Gratton, professor of London Business school who is well known for her research and publication on aging societies where increasing proportion of people will reach age 100. Among them, I speak on the title “Wish You Create a New Generation of Challenge.”

The lecture series primarily targets young people such as college students in the form of Webinar, but subsequently released in Youtube for general public.

Since my lecture has been provided on line to students in May, I took liberty to provide the manuscript of my lecture in my blog separating in two segments for convenience of the readers.

 

「Wish You Create a New Generation of Challenge:Part(1)」

Lecture, Global Cultural Program, 2021
Memo. No.5
April 28, 2021

Haruo Shimada
President, Shimada Research Institute


Ⅰ. Introduction


ーHello! I am Haruo Shimada. I served TMU as chairperson until the end of March 2021.
ーIt is my great honor and pleasure to have this opportunity to talk with you and share ideas together.
ーFrom last year, we have been suffering from Covid19 pandemic, which is a very unique experience for all of us.

ーInconveniences and difficulties.
・I suspect that you suffered from many inconveniences and encounters difficulties.
・Unable to attend campus and join the classes and extra-curricular activities
・Social distance, stay home, unable to associate friends.
・Unable to travel, Particularly, unable to travel abroad, Impossible to study abroad,
・Obliged to change your study plan and career plan.

 ーEra of great changes
・We are living in an era of great changes. Covid19 is one. There are many other problems, such as climate change, global conflicts as symbolized by US-China confrontation, and increased economic and social differentials.
・As they get along, things will get worse. Disturb and harm our life and future.

ーHowever, there are opportunities for us to change the situation, change the world and change the history, particularly with the power and effort of young generation
・This is the theme I would like to talk with you and share our thoughts together.

・Let us begin my talk by examining major problems we are faced today.

 

Ⅱ. Serious Threats Encountering Young Generation


1. Covid 19
ーEmergence and spread of Covid19
・Covid19 was found to have emerged in China at the end of 2019 particularly in Wuhan
・It has spread rapidly throughout China within a month.
・Medical doctors and epidemic experts worked hard under the strong leadership of the government, and the spread has been confined within a few months.

・CV19 then spread to Asia and Europe. In Europe the infection spread widely.
・In March 2020、CV19 spread to the US, where infection exploded.

・In spite of highly developed medical technology and systems, the US suffered from the CV19 most seriously.
・They suffered from the largest number of infection and deaths largely because of political mistakes of Trump administration.

・CV were found to have spread widely to other countries such as Russia, Brazil and India, and many other areas of the world.
・The spread has been quick and broad perhaps because of highly developed global transportation systems of the contemporary world.
・Currently, infection in the world amounted to 145millions and 3million people died.

ーSpread confinement measures and man-made recession
・Since CV19 infects among people by breaths, people have been advised to take social distance. The governments required people to stay home and not to meet others.
The governments even locked down cities so that people cannot move around.

・Such policies suppress economic activities. Stores and transportation systems lost business opportunities. Unemployment increased, and people lost incomes.
This is a man-made acute recession which many countries had to suffer.

・In order to supplement income losses, and support victimized businesses, the government spent large amount fiscal money, which accumulated huge amount of government debt in many countries.
・Since much of such government fiscal spending was financed by government bonds, this became a huge burden for young and even future generations.

ーVaccination
・Scientists and medical industry worked very hard in several developed countries to create vaccines to beat the virus.
・While it usually takes several to even 10 years to develop such vaccines, a few advanced medical ventures, universities and drug makers invented new methodologies to develop vaccines within a year, which is a remarkable progress in this profession.

・Vaccination started in some countries toward the end of 2020. Some countries began to experience visible decline or slow down of infections, such as Israel and UK.
・Even the US, which has been suffering from the worst infection in the world, vaccination began to exhibit some effects of slowing down the spread of infection.

ーRemaining problems
・However, the vaccination does not seem to solve the issue as we hoped.
・One is the emergence and spread of virus variants. Since CV19 virus has only one belt to keep genetic code, unlike gene structure of other creature, genetic code may well collapse by any shock and create a different virus, which is a variant.
・This change often makes vaccines difficult to nullify the infection ability of the virus.
・The task of vaccine to chase the virus is not easy.

・The more serious problem is uneven distribution of vaccines among rich and poor countries. Since vaccines are expensive so that poor countries cannot have good access to obtain vaccines. It is the poor countries where people suffer most because of poor hygiene conditions and medical systems and services.
・WHO organizes an international organization called COVAC to supply vaccines to poor countries at low cost, but so far very little fund has been donated by rich countries.
・There are other problems associated with mis-conducts and policy mistakes by some governments. These human errors pose greater problems.
・We will discuss these problems later.


2. Climate change

ーGreenhouse effect
・Greenhouse effect: CO2 blocks radiation of sun-heat out of earth’s atmosphere
・Greenhouse effect increases with emission of CO2
・Since industrial revolution, industrialization increased CO2 emission markedly
・Av. temperature of the atmosphere increased by 1.0C for the period of more than 200 years since late 18th century till now.

ーIncreasingly apparent climate damages on the earth, creatures and human life.
・Increases of temperature give damages to the earth
・Increased temperature melts down ice on north and south poles causing heightening of sea level, resulting in sinking low level islands and shores, threatening lives of creatures and people.
・Increased temperature gives rise to empower typhoons giving more destructions.
・Changes in convection patterns within atmosphere causing irregular weathers resulting in drought and heavy rains and flood.

ーEfforts to slow down acceleration of greenhouse effect.
・Since the greenhouse effect has been accelerated by accelerating emission of greenhouse gases, most notably CO2, by increased industrial activity using fossil fuels such as oil, coal and natural gases in automobile transportation, iron manufacturing
and electric power generation.
・In recent years, many nations try to promote concerted actions to reduce carbon emissions participating to COP(Conference of the parties)activities.

・In 2015, 197 countries assembled together in Paris for COP21 and agreed to work for constraining the increase of average atmosphere temperature in 2050 less than 1.5C since the beginning of industrial revolution
・This movement has been disturbed by the leave of US led by Trump administration in 2017 from the Paris accord.

・However, Biden administration decided to come back to Paris Accord and has shown a strong wish to lead the international movement to combat against the greenhouse effect of the earth, as symbolized by Climate Change Summit proposed by
Joe Biden, which is a good news.

ーCan we stop the green house effect and save the world?
・The concerted action of international community to reduce carbon emissions is welcomed, but can we really control the increase of temperature within additional 0.5C within forthcoming 30years?
・Experts such view that the target is hardly achievable given the plans of participating  countries and the lack of cohesive cooperations of global community.

・Experts worry the incremental temperature may well exceed 2.0C by 2050.
・If that will be the case, the greenhouse effect will be aggravated much more and will exert much more destructive impacts on climate and the earth.
・Increased sea levels, flood, heavy rains draughts, mountain fires, destructive typhoons etc which will destruct living environment of creatures and human being.

・It is urgent and imperative for us to think more seriously to reduce greenhouse effect to save the earth and human living.


3. Global confrontations

ーThe US-Soviet cold war
・Currently, US-China confrontation is getting so acute that the world may look  as though it is beginning to suffer from the “new cold war.”
・Contemporary world history tells us that the world has suffered from “the cold war” since around 1950 till 1991. This war was between the US and Soviet  Russia.
・During this period, the world has been divided between Pax Americana, the group of allies and friendly democratic countries of the US, and the communist bloc which assemble satellite countries together under the leadership of Moscow.
・There has been almost no economic relations between the two blocs.
・On the other hand, military confrontation between the two blocs has been very acute.
・In fact, both blocs have accumulated destructive power of missiles and nuclear weapons enough to kill global populations more than several times.
・The cold war ended with the impasse of Soviet economy and the collapse of political system around 1991.

ーChinese growth and US response
・In contrast to this cold war, the relationship between the US and China is much  different.
・Unlike Soviet Russia, US and Chinese economies have been deeply intertwined.
・In fact, they are the largest trade and investment partners with each other.

・For 30years since the beginning of 1980s, Chinese GDP has kept growing remarkably annually about 10% by the strong leadership of Dong Xiaoping who promoted  “reform and open” policy. The economy grew several times during this period.
・He maintained the basic stance of “hiding your nails and accumulate power within.”
・In 1990s, the US leaders thought and hoped that with rapid economic development and accumulation of the middle class, China’s political system may well change to accommodate democracy.
・With this optimism, the US helped China to join WTO so that China can enjoy global trade and export as they wish including the US market.
・It is in this period when inter-penetration of US and Chinese economies deepened.

ーChinese pursuit of hegemony
・However, the US was disappointed painfully by the emergence of Xi Jinping.
・Unlike Don Xiaoping、Xi Jinping asserted strongly the power and the goal of PRC (People’s Republic of China) by the slogan of “Chinese Dream” by which China will build a powerful leading country of the world dispelling the deep grudge of  suppression by the Western powers since Opium War of 170 years ago.
・Xi plans to build a self-contained country by 2021, 100th anniversary of Chinese Communist Party, a middle level advanced country by 2035, and the powerful country to lead the world by 2049, the 100th anniversary of establishment PRC.
・Xi proposed a “New Large Country Relations” to the US in 2013, and launched  a mega global development plan “One Belt One Road” encompassing Asia to Europe.
・Facing with slowing down of the economy since 2010s, Xi claimed “New Normal Economy” by which to encourage and develop high-tech industry and promote DX.
・Many high-tech IT companies developed and promoted the economic transformation.
・Among them is Huawei Technologies, the most powerful IT communication devise manufacturer

ーUS-China hegemony war
・Facing with such development of China, while Obama administration maintained  “strategic patience,” Trump administration launched a furious policy to impose punishing sanction by imposing extra-ordinary high tariff on Chinese exports to the  US, which called forth Chinese retaliation and developed trade wars.
・Trump then focussed on Chinese high tech companies most notably Huawei as a spy company to steal information from its global 5G network to submit to Chinese Communist party and attacked Huawei and other high tech companies out of the global market. Trump’s action triggered a high tech hegemony war.

・Trump had to resign defeated by Joe Biden in 2020 presidential election.
・Biden administration dispelled Trump like policy against China though it has not lifted so far high tariffs against China.
・Biden administration exhibits a profound distrust against China particularly in the  sense of violation of human rights as shown by suppression of Uyghurs in Xinjiang district and suppression of democratic activists in Hong-kong.
・Perhaps because of relative decline in recent years of the superior US military power  against China, Biden administration asks allies to join US strategy of global sieging of China.


4. Economic and social differentials

ーDifferentials have been traditional problems of human societies
・In the current world、economic and social differentials are getting increasingly important and serious issues which impose many difficult problems to societies.
・Differentials among people have been existing in human societies in the long time.
・There have long been differentials among races, genders, religions, social status etc.

ーDifferentials aggravated by competitive capitalism
・In recent years, economic differentials have been aggravated by competitive capitalism
・As capitalist competition intensifies, businesses and countries transfer low paid jobs to  subcontractors and low wage countries, thus increasing economic differentials  among different classes of workers and between rich and poor countries.

ーDifferentials aggravated by DX
・With the remarkable development and penetration of digital transformation, the transfer of jobs to low wage regions and countries has been aggravated.

ーDifferentials causing political turmoils
・Such differentials aggravated by DX gave rise to political division of society as  exemplified by recent presidential elections in the US.
・Namely, those who lost jobs in the rust belt area of the US support strongly Mr. Donald Trump who accused China. The basic reason has been drastic reallocation of plants from high wage region of the US to low wage countries due to DX.
・Brexit took place by the similar reason of aggravated differential by globalization.

ーDifferentials related to CV pandemic
・In fighting against CV, poor countries are disadvantaged to secure vaccines which aggravates differentials stemming from medical services.

ーDifferentials relating to climate change
・Further, poor countries cannot afford to reduce carbon emissions and deter the  International effort to reduce greenhouse effect of climate change.
・Increases of economic and social differentials are a complex phenomena reflecting a variety of reasons and in turn give rise to new problems in the area of politics, spread of epidemics, and even climate change.

Japan’s Choice for Post-Abe Era: Continued Stability or Fundamental Reform

  1. Abrupt resignation of PM Shinzo Abe

   

    On August 17, 5:00pm PM Shinzo Abe made an abrupt announcement that he will resign as prime minister.  It was reported that his health condition has not been good since July. And since he visited Keio University hospital on August 17 for 7.5 hours and on 24 for 3.5 hours. there has been a rumor that something serious may have been happening 

with Mr.Abe.

 

   At his press conference for the first time since last several weeks, he explained that his ulcer colon was found active again. Since he feels that he may not be able to perform the job of prime minister at his best to respond to the trust of the public, he decided by himself to resign at this point. 

 

   He said that leaving the job is heart-breaking without accomplishing some of important tasks such as solving the issue of kidnapping by North Korea, peace treaty with Russia, and amendment of Japan’s constitution.

 

2.  A brief review of accomplishments of Abe administration

 

   Let me first point to two positive accomplishments out of many which can be evaluated positively.

 

   One is the fact that Abe administration lasted long and gained positive evaluation both in and out of Japan as “stable” administration. Mr. Abe 

changed the image of very unstable administration of Japan for the first 

decade of 21st century when Japan had 6 prime ministers, each did not last much more than a year.

 

  Another accomplishment is his economic policy package known commonly by “Abenomics.” Abenomics consists of 3 arrows: (1)monetary policy aiming at realizing 2% inflation, (2) fiscal policy which intends to accomplish both growth and fiscal reconstruction and (3) growth strategy. Abenomics looks systematic and comprehensive economic policy package so that it called forth attention both domestically and internationally.

 

  Abe administration launched Abenomics immediately after the outset of the administration, namely, early spring of 2013. The outcomes of Abenomics, when evaluated after 7 years, are mixed. Monetary policy which deployed a massive quantitative easing was unable to attain moderate on-going inflation of 2% as 

Intended. Fiscal policy failed to improve fiscal reconstruction, and growth strategy

was not quite able to promote economic growth as planned.

 

   However, it is true that after the outset of Abenomics, stock prices increased remarkably which gave a certain confidence to economic community. And the fact

that for the period of Abe administration of 7 years the economy grew even at a modest rate of around 1% a year, despite very low potential growth capacity of Japanese economy and the dreadful negative impact by COVID19 infection, can be evaluated positively.

 

3.  A brief review of problems of Abe administration

 

   Let me then point to two negative problems associated with Abe administration.

   One is repeated scandals which reveal the undesirable nature of Abe administration

of insufficient or even lack of disclosure of information. A couple of typical scandals of this nature are imprinted in the minds of people. They are often called “Mori・Kake problems.” Both are schools: one was given a large subsidy which cannot be justified by fiscal rules. Another is given permission of establishing new department which cannot by justified by rules of allocation of schools. Chairpersons of both schools are “friends”of Mr. Abe. 

 

   In order to cover up the process of implicit or disguised permission by prime minister’s office, the internal documents have been falsified. And a local officer

of ministry of finance in charge of documents committed suicide. But the whole process has been covered up and the truth has never been disclosed. There have been

several cases of scandals which all covered up the truth. Such scandals left an image on the public of non transparency and the lack of disclosure of Abe administration.

 

   Another negative problem is associated with “Abe singular power system(Abe Ikkyo).”

This means that Mr.Abe has an outstanding power in Japanese politics. This is not the problem of Mr. Abe himself. He has been working very hard to win elections and has kept winning all the elections after the outset of the administration. Working hard to win elections is a common nature of any politicians. In this sense Mr. Abe should be praised rather than to be blamed.

 

 The formation of de facto Abe’s extra-ordinary dominance is also a derived consequence of introduction of small electoral constituency system which was introduced in 1994 with an intention to make change of party In power easier after a long dominance of LDP. Since one party can send only one candidate to a constituency, this system enpowered  prime minister’s office remarkably which can officially nominate candidates. Abe administration made use of this system skillfully to maximize its political power.

   

   The fact that Mr.Shinzo Abe is regarded as an outstandingly powerful leader makes many people and organizations simply obedient to Abe administration and Mr. Abe.

They include particularly politicians, political factions, bureaucrats and government offices, and businesses. In this system, minority views tend increasingly not heard.

This makes Japanese politics lose flexibility and openness, and this tendency extends to governments, business and society itself. Japan as a whole tends to be sick and loses

openness and vitality. This is the most serious symptoms, consequences and problems

arising from “Abe Ikkyo system.”

 

4. Candidates for LDP presidential election

 

  Within a few days after Mr.Abe’s announcement of resignation, five candidates have emerged.  Mr. Shigeru Ishiba, ex-secretary general of LDP, Mr. Fumio Kishida, Chairperson of policy coordination and ex-minister of foreign affairs showed their strong interest to join the race. Mr. Taro Kono has shown his keen interest but dropped out after having been strongly advised no to do by Mr.Taro Aso, the chair of Aso faction to which Mr.Kono belongs. Mr. Yoshihide Suga, chief cabinet officer,  has been anticipated by many to run for the office but not shown his will for a few more days.

 

5. The method of election

 

   Soon after the announcement of Mr.Abe’s resignation, a few executive members of LDP led by Mr.Toshihiro Nikai, Secretary General of LDP. and consulted the method of

election. They have been inclined to opt for not a normal style of election but a contracted form of election by the general meeting of Diet members of House of Commons and House of Councilors.

 

   Normally, the election of president of LDP is conducted by 394(current number)

Diet members and the same number of local LDP members. However, the executive members led by Mr. NIkai strongly recommended to resort to an abbreviated  form of election by 394 Diet members plus 141 local members comprising of 3 representatives for each local municipalities. 

 

   There has been increasingly strong opposition against this abbreviated form of election largely by young Diet members. At the extended Diet member meeting, there was a heated debate among the members. Those who assert the normal election including 394 local members argue that with the support of larger number of local LDP members the newly leader will have a larger support of the public. 

 

   However, executive members of LDP turned down such opposition on the ground that

the election this time is not executed at normal time but is conducted at an abnormal time of resignation of prime minister before the end of his term. And since it has to be executed under the pressing condition of COVID19 infections, time constraint is so severe that we should not allow for political vacuum.

 

   This argument, however, has two defects. One is that there would not be much difference between the two methods. Both cases, the LDP headquarter has to use

postal mail to ask local members to register and also to send their vote back to the LDP office.  Were there time difference, it would be at most a few days. A few day difference would not be long enough to justify the adoption of abbreviated form of election.  The 

other is that PM Abe said clearly at the press conference that he will resign formally after witnessing the birth of the next prime minister. In other words there would be no

political vacuum since prime minister is still in charge.

 

   To me it seems that the true intention of the executive members lies somewhere else.

That is, they insist to adopt the abbreviated form of election in order to limit the participation of local LDP members, and limit the time for debate for election, thereby provide less opportunities to the candidates who have opposing views against Abe administration, most notably, Mr. Shigeru Ishiba.

 

6.  Participation of Mr.Yoshihide Suga and land slide of political factions

 

   Mr. Yoshihida Suga made a formal declaration to participate the race for president of LDP in the evening of Sept.2. Immediately after his declaration, political factions except one for Ishiba and for KIshida announced one after another to support Mr. Suga. This looked almost as if political land slide has taken place. Eventually 5 major factions:

Hosoda, Asou, Takeshita, Nikai and Ishihara, joined this avalanche. This is relatively unique phenomenon in presidential election of LDP.  This is particularly so because 

Mr.Suga does not lead or belong to any such political faction. Why this phenomena

took place? Before thinking about it, let me explain a bit about who Mr. Suga is like.

 

7. Who is Mr.Yoshihide Suga?

   Mr. Suga, currently age 71,  has been the closest and powerful supporter of Mr. Shinzo Abe and his administration all through.  He was born as son of farming family in Akita prefecture. After graduating from high-school, he came to Tokyo. He made his 

living working at cardboard factory for a while which was monotonous and disappointing. He began to think politics is important, and got a job as rank-and-file

assistant of a politician,  Mr.Okonogi, who later became minister of international trade and industry. After working for Mr.Okonogi’s office for 11 years, he became a member of city assembly of Yokohama at age 37. At age 47, he won the election to become a member of House of Commons. As a politician, he is a very late starter.

 

   He worked hard to assist influential politicians and finally arrived at Mr. Shinzo Abe

who trusted Mr. Suga. When Mr. Abe became prime minister in September 2006, Mr.

Suga was assigned a job as minister of general affairs of the first cabinet of Mr. Abe.

 This cabinet did not last long, however.  Mr.Abe had to resign only a year later due to worsening of his chronic disease, ulcer colon. 

 

   After stepping down of Abe administration, Democratic Party of Japan took the office of prime minister. This is the historic change of power from LDP which has monopolized 

governing power more than half a century to DPJ. However, since DPJ politicians have had no experience in running the country, DPJ administration made many mistakes and

every time they made mistakes they changed prime minister. In fact DPJ nominated 

3 prime ministers in 3 years. LDP has been seeking an opportunity to regain the power

back. 

 

  In this process, Mr. Suga kept supporting the mentally wounded Mr. Abe, kept encouraging and assisted effectively for Mr. Abe to rise up again to challenge 

prime ministership against the then Noda administration of Democratic Party of Japan. Mr Abe won the fight and took the office of prime minister at the end of 2012. Mr.Suga took the role of chief secretary of cabinet and ever since he kept the position during the rest of Abe administration.

 

   As the cabinet secretary he took care of most any issues the cabinet is faced across and beyond the boundary of ministries. With his careful and well prepared paving the way of politics and policy formation, Mr. Abe was able to maximize his potential to lead 

the country and also work effectively in international political arena. Mr. Suga controlled personnel matters of government offices so that he gained the power as well as trust by government officers thanks to his good care of them. It is perhaps no too much to say that Abe administration is in effect largely run by Mr.Yoshihide Suga.

 

8. Rationale? of band-wagon of political factions

 

  Under these circumstances, it may be rational for many major political factions all join to support Mr.Suga as a candidate for prime minister. This is because Suga administration, if it realizes, will mot likely be a copy of Abe administration. Mr. Suga

knows best of policies and politics of Abe administration because it is Mr. Suga himself who has been preparing and executing all this of Abe administration.

 

   Most politicians except outright contenders against Mr. Abe are those who have enjoyed the merits of following the Abe dominance system for the last 8 years. It is perhaps natural for them to keep enjoying their vested interest associated with 

Abe administration. For them, keeping the status quo may be the best. Change may be scarely because they may lose the merits they have been enjoying up to now.

 

9. We need to choose the leader who can change the country

 

   My basic question is whether this is good for the country. Not to change may be good for most politicians who have enjoyed the merits of the past system but may be bad or even possibly fatal for the country because the world is changing rapidly. If Japan will not change the country may well lose the critical assets and possibilities.

 

  On August 28, we had an opportunity to listen to Mr. Shigeru Ishiba’s speech at a study meeting of Shimada-juku. In fact, his speech happened coincidentally to be half a day earlier than Mr.Abe’s announcement of his resignation.

 

  Mr. Ishiba was exceptionally eloquent and persuasive. Out of many topics ranging from

excessive concentration into Tokyo, regional development, enriching people’s life, security issues, international relations particularly with Asian neighbors etc, the following statement was particularly impressive. 

 

  That is, during the recent 3 decades, Japan’s democracy has changed and deteriorated. In his view, democracy depends on 3 critical conditions: (1) as many entitled voters should vote, (2) correct information is provided to voters, (3) minority 

views should be heard. Needless to say, these are general and universal principles.

He implies that these principles have not increasingly be preserved in Japan.

 

   Contrasting this remark against what happened during Abe administration, the issues become more obvious. (1)Voting rate has been stagnant. Limiting the voters for LDP president much fewer this time is against the principle of democracy. (2) Non transparency of Abe administration, as written above, is against democracy, and (3)

Abe Ikkyo system(Abe’s extra-ordinary dominance) is to suppress diverse minority views. The band wagon effect of LDP presidential election is a case in point.

 

   What Mr. Ishiba implies is that Japan needs a comprehensive overhaul in order to

revive desirable democracy taking advantage of resignation of Mr.Shinzo Abe as prime minister. The band wagon phenomenon I mentioned above is the movement to override

and suppress this kind of minority view because this is to trigger a change of Japan, which is dangerous for people who have enjoyed their merits and profits under the past system.

 

   I am deeply worried about the overwhelming tendency observable in Japan to keep the interest of the past and prevent Japan from changing. I am deeply worried as to what will happen if Japan does not change in the world which is rapidly changing. If Japan will not change, Japan will lag behind and lose prosperity and opportunities.

 

  In fact, Japan has had memorable experiences in the past that Japan changed fundamentally and thus overcame the fatal crisis and opened possibility for subsequent 

remarkable development.

 

  One was Meiji restoration. Faced with threats of Western powers as symbolized by the black fleet which had incomparable high technology and military strength, Southern clans revolted against Tokugawa government which enjoyed 260 years of secluded peace, toppled the old power and established a new industrialized nation.

 

  Another is the defeat in Pacific War, occupation, and remarkable recovery which led Japan to materialize miraculous economic growth in subsequent decades. This “miracle”

happened in the wake of denial of Japan’s old system which led Japan to war, abolished

and destructed Japan’s power structure represented by military and financial groups.

This change opened the new environment where vigorous ventures developed small

firms to global major businesses.

 

   Compared with these experiences. The 8 year rein of Abe administration seems a very minor case. However, in the current world where speed of change is very fast,

8 years of monopoly of power to which the rest of the system is all geared、this is important enough to reexamine and deny and reform the demerits associated with it.

 

   Most probably, Mr Yoshihide Suga will be elected as president of LDP on Sept.14 and 

will be nominated as prime minister of Japan in an extra-ordinary assembly of the Diet on Sept 16, and he will conduct policies to sustain what Abe administration has been doing in the last 8 years.  But Suga administration’s term is up to the end of September

2021. Mr.Suga may well wish to get reelected in the LDP presidential election then and wish to continue prime ministership further. This is a natural desire of any politician.

 

  But I wish he understands what Japan is faced up with. Lack of change blocks the 

sight, opportunity and possibilities of the country. In a democratic country which Japan

proclaims, only way to trigger change is “open discussion and debate with heterogenous views. I wish he invites such discussion and debates of serious politicians

at latest half a year before the end of his term to select a leader who can chang

Economic Security of Japan

I. Introduction


Japanese government recently has become increasingly keen of national economic security. This is largely to reflect recent development of global trends, for example, of resorting to economic sanctions to resolve international confrontation as often been adopted by Trump administration of the US, increasingly frequent cyber attacks, and violations of international rules of trade etc.


With an increasing awareness of this issue, the Japanese government has begun to deploy measures to assure national economic security in various aspects. I would like to review some of such developments of recent months, and pose questions as to where Japan is aiming at with what kind of basic consideration of national economic security should be like.

 


II. Recognition of national economic security


Mr.Akira Amari, chairperson of government tax panel and also chairperson of the LDP Caucus of Rule Formation Strategy, is the most earnest proponent for Japan to equip itself with necessary measures of national economic security.


Mr.Amari has been in charge of industrial policy as a minister and also took the chief responsibility of TPP negotiations. With this and other experiences, he has been increasingly keen of the necessity of economic security issues.


Prior to become policy maker of the government, he has spent some yeas as a businessman of manufacturing industry. While working in a manufacturing company,
he cannot but questioning of the common sense of Japanese business that good products will sell well. He thought that products which sell well are good ones. This is because for product to sell well, the product has to take advantage of the market rules conducive for the product. This means that the company has to have a dominant role to set the rules for the market.


This experience has become a basic thought for him to think about the importance of acquiring rule setting capability for a country to protect itself in economic security.


Having worked years as a policy maker, he has encountered many cases that Japanese government officials have been convinced of naive belief that the country should follow “international order of trade” to seek for good trade performance of the country. This is comparable of the naive business thought that good products will sell well.


In his view, the fact is other worldly. Rules of the market are determined by dominant players. And products of the dominant players will sell well because they make the rules for their own interest. By the same token, the country should have the power to set international rules to enjoy its own economic security.


At the same time, in the world where countries are protecting themselves with each other by international security arrangements, the country has to build trust with important allies. Trust building is usually tested by protecting mutual secrecy.


Mr. Amari has been under impression that Japan has been too naive and innocent in terms of international rule setting arena and protecting secrecy with important allies. He has been increasingly active recently to equip Japan with necessary measures to attain capability of protecting national economic security.

 


III. Establishing Economic Task Force in National Security Council


On April 1, office of Economic Task Force was established within the office of National Security Conference with a strong recommendation of Mr. Amari. This is a small office having only 20 staff. However, its mandate is big. It is supposed to control various issues which entangle economy, diplomacy and national security.


The first task it tried to tackle is to protect Japan from COVID19 infection at the shore. Soon the office had to draw a plan to develop Japan’s “statecraft”, specifically, counter measures to protect Japan from China’s influence on diplomacy and corporate activities through their economic means. Behind this preparation was an increased concern held by Japanese government that shares of high-tech Japanese companies whose values were dampened by acute recession caused by COVID19 infection might be purchased by Chinese companies. The office attempted to construct the data base of advanced technologies of Japanese companies.


At the beginning of April, the government determined to reject entry of people who come from COVID19 infected countries. This task was prepared by the forerunner of
the office which had been organized in October 2019. This policy was authorized by the Cabinet meeting as the issue of national security on the ground of article 5 of Immigration Control Law which regulates cases of suspected terrorists.



IV. Various actions taken since then up to now


1. Controlling foreign investments to strategically important Japanese companies
On May 8. revised foreign exchange control law was put to effect. On the basis of this revised law, foreign companies which want to invest into Japanese companies more than 1% will have to report in advance. The upper limit used to be 10%. This policy has been criticized by foreign investors; criteria of choosing “strategically important companies” are vague and inconsistent, and this will hamper foreign investment into Japanese business.


2. Protecting against outflow of advanced technologies
In June, rules have been formulated in order not to let advanced technological information flow out of universities.
Also, on June 26, the government formulated “Integrated innovation strategies” by which inspection of foreign students can be made more strict for fear of scholarly Intellectual spying.


3. National security on information communication in 5G era.
On June 25, NTT and NEC announced that they will work closer again as they had been during the time when NEC was subordinate company of NTT in order to catch up communication technology, particularly to develop jointly post 5G technology. The government announced that it will provide special tax treatment on development of communication technologies by Japanese companies. At the end of June, the US initiated Open RAN Alliance, a part of de fact international network sieging, Huawei, the leading Chinese communication manufacturer, invited NTT to join.

 


V. Caution against China is at the basis of national economic security


The US Trump administration determines accuses harshly China as information spying country. Thus the US is particularly sensitive against Chinese statecraft. The Trump administration is concerned about the fact that China occupies the top of four of the 15 important UN organizations such as ITU(international telecommunication union) and FAO(Food and Agriculture organization). The US, EU and Japan are concerned about and opposing against Chinese proposal to ISO as adopting Chinese Surveillance State model as International Standard to control COVID19 infections.


VI. Japan’s Basic National Security is questioned


An important question is under what kind of grounds and basic thoughts about national security strategy Japan can and should seek to strengthen national economic security.


Japan is military ally of the US. On this ground, Japan has to share security policies closely with the US. At the same time, China is the most important trade partner of Japan, Japan needs to have close and friendly ties with China.


The newly immersing issues of national economic security require both Japanese government and the public to think and discuss this issue deeply and fundamentally.

"Kurodanomics" : It's Progress and Evaluation

Ⅰ.   Introduction

  “Kurodanomics” implies the monetary policy which Mr. Haruhiko Kuroda, chairman of the board of Bank of Japan, has earnestly pursued since April 2013 soon after he took the office in March. Although Kurodanomics is not as commonly used expression as “Abenomics,” which means the package of economic policies of the administration led by prime minister Shinzo Abe, let me use this expression to represent the package of financial policies led by Mr. Haruhiko Kuroda for 6 years since spring of 2013.

   The principal aim of Kurodanomics has been to get Japanese economy out of the prolonged deflation, and attain the pace of stable 2 percent annual inflation. Since financial policy is crucial economic policy managed by the central bank of the country side by side with the government’s fiscal policy. The series of policies conducted by the leadership of Mr.Haruhiko Kuroda for the last 6 years have been unique and critical to determine the performance of Japanese economy for the period, I picked this topic with special interest.

  In this essay, I would like to review the basic objectives of Kurodanomics, its process of implementing critical policies and evaluate its performance. I will also discuss challenges of Kurodanomics for years to come.


Ⅱ.  Why “Kurodanomics?” economic and political contexts

   Mr.Haruhiko Kuroda was appointed as chairperson of Bank of Japan in March 2013 following his predecessor Mr. Masaaki Shirakawa. Mr.Kuroda has been appointed by Abe administration at the time when Japanese economy has been viewed as trapped in a prolonged deflation and economic stagnation.

   In spring 2013, Mr.Yoshihide Suga, Minister of Cabinet of Abe administration, kindly showed up in the special seminar of Shimada Juku to give a talk to the members. He said that the principal target of Abe administration was to overcome this prolonged deflation. He criticized the previous administrations saying that they have been relying on bureaucrats of ministry of finance on financial policies, and on BoJ experts when it comes to financial policies, and its consequence has been prolonged deflation and stagnation of the economy. He emphasized that Abe administration would take the initiative of economic policy by themselves, namely political leaders supported by experts.

   It is known that in preparing for competing to take prime ministers office, Mr.Shinzo Abe organized a small strategic study group of politicians and experts to formulate basic policy of Abe administration much ahead of the election of president of Liberal Democratic Party which was in September 2012. To the meeting of this study group, Mr. Haruhiko Kuroda, the then chairperson of Asian Development Bank, has participated frequently flying  often from Manila.

   When Mr. Kuroda was nominated as candidate for chairperson of BoJ, he testified in the Diet session of the House of Councilors saying that the fact that Japanese economy has been suffering from the deep deflation as long as 15 years since the 1990s must mean that BoJ did not conduct its responsible policy to overcome the problem. Incidentally, from 2008 to 2013, the period when BoJ has been chaired by Mr.Shirakawa, CPI(excluding fresh foods) declined by 1.4% and real GDP shrank by 1.2%. He obviously meant to take a leadership to overcome this serious issue of prolonged deflation and stagnation of Japanese economy as chairperson of Bank of Japan.


Ⅲ.  An extra-ordinary dimensional monetary easing

  Mr. Haruhiko Kuroda made a widely publicized declaration of his major policy in April 2013, which he himself termed “extra-ordinary dimensional monetary easing. He appealed to the press using the magic number of 2, i.e. attaining 2 percent inflation within 2 years. For that purpose, BoJ will increase the supply of base money by 2 times. His message was so clear and straightforward and also unprecedented in the sense that chairperson of the central bank commits the target of his major policy with quantity and time limit, it was broadly publicized across the world.

   In the community of financial experts, this policy is phrased as “QQE, “ namely, quantitative and qualitative monetary easing. The concept of “qualitative” easing is added in this policy since BoJ takes into account of the mix of financial commodities in addition to the total quality in order to carefully manage the effect of easing by adjusting the mix of heterogeneous financial commodities such as ETF.

   To be specific, his declaration of the policy has 3 major commitments:
(1) To attain the stable pace of inflation of 2 percent per annum within the time horizon of 2 years, hopefully, as early as possible. In fact, this target is included in the Accord between the Government led by prime minister Shinzo Abe and Bank of Japan led by chairperson Mr.Masaaki Shirakawa signed in January 2013.
(2) To achieve this target, BoJ will double the stock of base money and also double the stock of long-term Japanese government bond(JGB) and ETF(exchange traded fund) within 2 years.
(3)  Prolong the average remaining period of long term JGB by twice.

  The basic aim of this policy of QQE was to change the mindset of Japanese people from deflationary to inflationary. Since Japan has been sunk in the depth of deflation for nearly two decades, people have been used to deflationary economy where prices gradually fall or at least to not increase. Under such pattern of expectation, people tend to wait until prices fall before purchasing, and investors hesitate to invest because returns are expected to decline. This is a serious symptom of prolonged deflation which may well shrink the economy as time passes.

   What Abe administration aimed at was to get rid of this deflationary mindset of people, and instead, drive people to have inflationary mindset. Under inflationary mindset, people tend to buy things as soon as possible to enjoy merit of relatively cheap price, and investors tend to invest early in order to recoup large gains in the inflationary future. Whether such change of mindset will take place is the critical strategic intent of “Abenomics” and more specifically “Kurodanomics.”
 
   This declaration of QQE appealed strongly to financial experts in the world. Major investors and speculators rushed to bet on the declared increase of money supply, and sold huge amount of futures of exchanges at the current price, and only a few months later obtained huge gains. They also bought massive amount of shares of Japanese corporations, particularly of export industries, expecting that reduced exchange rate of the yen realized by expected massive increase of money supply will increase exports of such corporations and hence jerks up prices of their shares.

   Speculations and investments based on such expectations hit the top of the nail. Exchange rate fell rapidly as much as 20 percent in a few months, and share prices started to increase. Forerunning speculators and investors must have obtained large gains. Many others including Japanese investors followed. As a result, share prices of Tokyo Stock Market increased as much as 80% half a year later. This rapid increase of share prices and corporate profits seem to have given an optimistic momentum for Japanese economy.

    However, this momentum did not quite lead to increases of wages, and not to increase of prices. Since wages did not rise, people were not encouraged to spend, and stagnant movement of prices did not meet the strategic intent of the government and Bank of Japan to change the mindset of people from deflationary to inflationary.

   On the top of such stagnant behavior of wages and prices, the increase of consumption tax rate from 5% to 8% which was executed in April 2014 gave a profound shock to the government because after the increase of the tax rate, consumption dropped sharply. In fact, consumption increased markedly prior to the tax hike in the first quarter of 2014 as much as 4.9% of GDP per annum, but dropped dramatically as much as 7.1% of GDP in the following quarter in the wake of the increase of the tax rate. Ever since, the consumption has been stagnant until now which has dragged the performance of Japanese economy. This drastic drop of consumption in the wake of tax rise appears to have remained as a serious trauma for Abe administration making its tax hike policy reluctant.

   The boom siphoned by Kuroda QQE in 2013 was short lived although it still remains somewhat in share prices and corporate profits so that the strategic intent of altering mindset from deflationary to inflationary seems to be getting increasingly difficult to be satisfied. In this sense, the evaluation of 2013 QQE is mixed. It was successful in increasing share prices and corporate profits but failed to achieve its strategic intent of fostering inflationary mindset.


Ⅳ.   The second “Bazooka” and its meaning and effects

 Economic conditions have become more adverse for forging inflation in 2014 since consumption has not recovered from the sharp decline in the wake of the increase of consumption tax rate in April, economic growth has been sluggish. And above all, the sharp decline of oil prices since summer 2014 suppressed general trend of prices.

   At the policy committee of BoJ held on October 31, 2014, a surprising decision was disclosed. BoJ announced that drastic measures to fortify monetary easing to be executed as massive increases of purchase of JGB and relevant investment funds implying strengthening monetary easing measures both in terms of quantity and quality, featured mainly by an increase of purchase of JGB by 30 trillion yen annually and also increase the
purchase of investment trust 3 times. This package is nicknamed as “Second Bazooka, “ which is symbolized by the magic number of “3.”

  To be specific, the announcement included:
   ーIn terms of quantity:
     ・Increase the supply of base money by approximately 30 trillion yen to reach the
        annual pace of 80 trillion yen,
     ・This is done mainly by an increase of purchase of long term JGB by 30 trillion yen
         to reach the level of 80 trillion yen per annum.

   ーIn terms of quality:
  ・Extend the remaining period of JGB up to 7 to 10 years
      ・Purchase of ETF(Exchange traded fund) by the pace of 1 trillion yen to reach
         3 trillion yen.
      ・Purchase of REIT(real estate investment trust) 3 times more to reach 90 billion yen a year.

    It was reported later that there has been a harsh debate within the policy committee of BoJ between pros and cons about this decision. Those who propose this choice argued that the supply of a sizable additional base money is needed to show a strong will of BoJ to overcome deflation, while those who criticize argued that the impact of supply of additional base money is limited and such a massive supply may be interpreted as de fact BoJ’s fiscal
finance, which is prohibited by the fiscal law. After 4 hours of harsh debate, the decision was made by voting at the policy committee with 5(including the governor) who supported and 4 who opposed.

   The announcement of BoJ to add a major supply of base money had a positive surprising effect to the international financial market. This had a positive effect particularly the its timing was shortly after the FRB’s statement of ceasing the massive monetary easing which has been repeated three times until then. Share prices of stock exchanges of NY and other places in addition to Tokyo have risen markedly indicating welcoming response of international financial market to this surprise move of BoJ. However, this positive response has been only short lived.


Ⅴ.   The introduction of minus interest rate

  Since 2014, negative interest rates have been adopted by central banks of several EU member countries, and ECB also adopted negative interest rate. There have been some influence of negative interest rate of Europe to Japan through the international flows of funds. Declining oil prices have had a major global influence for depressing the prices and the economic conditions for BoJ has been quite adverse in terms of generating inflation.

   Arguments have risen toward 2016 in financial community in Japan that additional major action of easing is needed. Governor Haruhiko Kuroda has been quite cautious about such arguments.

   However, on January 29, BoJ made an epochal announcement that it will introduce negative interest rate. This decision was made in the policy committee held on January 29. Again the issue of introducing negative interest rate has called forth harsh debate within the committee. It was reported later that those support minus interest rate argued that downward risk of prices has been increasing, it is necessary to direct the funds of banks for loans, and introduction of minus interest is only limited. Those who against it argued that economic conditions are not bad and no compelling reason to provide major additional easing, and minus interest rate will suppress profits of financial organizations. And finally decision was made with 5 for and 4 against.

   Mr. Naoki Tabata explains that the basic intention of BoJ to introduce negative interest rate was to bring down the “yield curve” as a whole by pulling down the yield of short term fund by introducing negative rate. This is because commercial banks have had a tendency to concentrate their loans  in short term in order to avoid long term risks. This tendency has disturbed the intention of BoJ to bring down the long term rate indirectly by arbitration by its usual purchase of short term JGB. See Naoki Tabata,”Achievements and lessons of Quantitative and Qualitative Easing” in “Kuroda BoJ: Economic Analysis of Extra-ordinary Monetary Easing.” 2018 Japan Economic News Paper Co.Ltd.

 Introduction of minus interest rate intended to bring down the yield curve as a whole and solicit commercial banks to lend their funds more to businesses making use of lowered long term interest rate, rather than paying interest on their reserve deposit kept in BoJ. Also, in order to minimize the negative effect on profits of commercial banks, the amount of reverse deposit on which minus interest rate is imposed was limited as 23 trillion yen.

 Unfortunately, however, such intentions of BoJ was not well understood by private financial organizations for some period after the introduction of minus interest rate. Worried about the suppression of profitability, mega banks reacted by reducing interest rate for depositors rather than attempting to increase loans to businesses. Commercial banks criticized BoJ rather harshly complaining about the pressure imposed by BoJ to suppress their profits.

   Half a year later, the intention of BoJ seems to have been understood more by private financial organizations. The yield curve as a whole apparently has been pulled down and as a consequence housing loans and corporate investment increased taking advantage of the lowered long term interest rates.


Ⅵ.   The QQE with minus interest and the yield curve control

   Although housing loans and corporate investment for productive equipments have increased thanks to the lowering of long term interest rates, long term interest rate such as of 10 year JGB has been reduced unexpectedly much to even to minus zone so that management of insurance and pension funds have been disturbed substantively.

   Worrying about such substantive disturbances, BoJ began to consider controlling directly both short and long-term interest rates in order to secure reasonable opportunity for insurance companies and pension funds to secure their profits as well as ascertaining profit margins for banks.

    On September 22, 2016, BoJ held policy committee meeting with a special theme entitled “Comprehensive Inspection” of monetary policies. BoJ’s intention was to hold a comprehensive review of environmental changes as well as monetary policy itself and then to arrive at adequate policy directions upon such comprehensive considerations. BoJ’s strategic intent was to justify what it intends to do as note above after the ritual of such “comprehensive review.”

    As a comprehensive review, the meeting identified the major reasons why targeted price increase has not been attained as follows:
  ・Falling down of oil prices,
  ・Stagnant consumption in the wake of consumption tax rate increase
  ・Slow down of developing economies and instability of international financial market
  ・Excessive lowering of interest rate has suppressed profits of financial organization,
       particularly of yields of insurance and pension funds,
    ・price expectations tend to be influenced strongly by the past price performance so that
       it tends to take time to increase price expectation.

    On the basis of such comprehensive review, the committee arrived at the following policy decisions:
   ーQuantitative and qualitative easing will be introduced to control both long term and
       short term yield rates.
 ーAiming at keeping the long-term yield rate in the neighborhood of zero percent, BoJ
      will control purchase of JGB.
   ーContinue the minus interest rate.
   ーContinue monetary easing until 2 percent level stable prices increase will be attained.

  These policy decisions deriving from the comprehensive inspection of financial policies arrived at the policy committee meeting of Sept 22, 2016 meant to keep 10 year JGB yield rate around 0%(within the range of plus and minus 0.1%) by applying a limit order method so that guiding yield rates for longer than 10 years in the positive rate zone and pulling up the yield curve as a whole, and at the same time, making the yield curve for shorter than 10 year terms more steeper so that securing the normal interest rate gap between longer and shorter terms.

   The policy decision arrived at this time included also continued purchase of JGB at an annual pace of 80 trillion yen. This is often called “overshoot commitment” implying that BoJ makes a strong appeal of its unchanged commitment to attain 2% level stable price increases.

   The policy package announced as a result of the comprehensive inspection of monetary policies conducted on Sept. 22, 2016 is generally called  “The quantitative and qualitative easing with minus interest and the yield curve control.”


Ⅶ.   The second term Kurodanomics and fine tuning

 Since Mr. Haruhiko Kuroda was appointed as chairperson of Bank of Japan in March 2013, his term was to be completed by March 2018. There was some discussion about who would be an appropriate successor, but without much discussion Mr. Kuroda was regarded as the most appropriate candidate, largely because prime minister Shinzo Abe wanted Mr. Kuroda to continue.  He was appointed as chairperson for the second term beginning in March 2018.

   During his first term, he has accomplished certain results such as making Japanese economy getting rid of prolonged deflation. Since overcoming deflation was the single most important policy objective of Abe administration, BoJ led by Mr. Kuroda may be said to have contributed this national objective positively.

   At the same time, however, Mr. Kuroda’s policy objective which he publicly committed in April 2013 that BoJ will realize 2 percent level stable inflation within 2 years has been far from being realized. While CPI increased appreciably in 2013 and reached the pace of 1.4 percent in late 2014, it has been disappointingly sluggish since then until recently. As of summer 2018, it remained only 0.8 percent.

   Since BoJ has been obliged to postpone the timing of attaining the target of 2% inflation rate at least 3 times, BoJ changed the policy of announcement at the policy meeting of April 2018 as not to publicly commit the timing. Incidentally, at the policy meeting of January 2019, BoJ predicted that price increase for 2019 would be only 0.9%, far from the target of 2%, implying that it will be a long way until the target will be attained, if any.

   In view of the accumulating huge volume of base money supplied by BoJ which grew as large as Japan’s GDP recently, there arose discussion at various corners as to the need to taper the BoJ’s extra-ordinary monetary easing. With the adoption of normalization policy by FED of the US since 2014 and the inclination of ECB toward the normalization, the argument has been intensified that BoJ, too, needs to normalize its extra-ordinary monetary easing policy before long.

   At the policy meeting of July 31, 2018, BoJ announced a decision to modify its stance of regulating the 10 year yield rate from the zone plus and minus 0.1% to somewhat broader zone of plus and minus 0.2%. This seemingly modest revision implies to control the flow of funds to land and financial assets not to aggravate “bubbles” on the one hand, and still to continue monetary easing to propel economy on the other, by allowing a greater discretion of controlling long term interest rate.

  In allowing for a slightly higher limit of 10 year yield rate with a purpose of mitigating asset inflation, BoJ still remained very nervous and cautious as not to let market players easily interpret that this move implies the tacit action toward the normalization of monetary policy. To ascertain that BoJ continues to commit to extra-ordinary monetary easing until 2% inflation is attained, BoJ stresses to increase purchase of massive JGB, namely, over-shooting policy. The latter policy is also meant to keep the support of reflationary proponents both within and outside of BoJ. Some speculate that BoJ is bound to take this stance at least until October 2019 when 2% increase of consumption tax is committed by Abe administration.


Ⅷ.  Some evaluations

   Having reviewed the progress of Kurodanomics for the last 6 years, let me make some personal evaluation.

1.Mixed achievements of Kurodanomics
     As the primary objective of the initiating Abe administration was to overcome the prolonged deflation, it is fair to say that Kurodanomics has contributed significantly to achieve this goal of Abe administration.
 
     To attain this outcome, BoJ led by Mr. Kuroda exploited a policy mix which has been developed step wise, namely, quantitative monetary easing associated with qualitative easing, then negative or minus interest rate has been introduced at least partially, which is then empowered by introduction of yield curve control. This comprehensive policy mix is vouched by the policy stance of “forward guidance.” To ascertain that BoJ continues to commit strongly to the 2% inflation target, it adopted so-called “over-shooting” policy of committing a voluminous purchase of JGB as much as 80 trillion yen a year since 2014.

    Mr. Naoki Tabata provides a clear, systematic and fair explanation that the policy mix adopted by BoJ led by Mr. Kuroda has been all indispensable and effective to achieve the policy goal to make Japanese economy get rid of prolonged deflation. He quotes an interesting comment by Mr. Benjamin S.Bernanke that whether quantitative easing is  really useful for generating economic growth is not understood. Mr. Tabata clarifies that the monetary easing policy as adopted by Kuroda’s BoJ was indeed useful to generate growth in terms of theoretical analysis. See for details, Tabata, Naoki

 On the other hand, the public commitment of Mr. Kuroda that he would achieve 2% stable pace of inflation within two years since spring 2014, if not earlier, has not been attained at all. In fact, having elapsed 6 years, the reality is far from the target, as reviewed earlier. Nevertheless, Mr. Kuroda strongly commits to this goal, and exploits every possible means to achieve that goal such as voluminous bazooka and overshooting commitments.Ironically enough, the more Mr. Kuroda commits to this promise of attaining the goal, the amount of the stock of base money increases which has recently grew as much as the total amount of GDP. This provokes the question as to how to normalize the situation, or to put differently, what and how the exit will be realized. Another serious question is worries about, which is the danger of economic crisis incurring possibly from this abnormal accumulation of base money, or the asset of BoJ.

2.   Is 2 percent inflation goal divine?
   The primary issue associated with the negative aspect of Kurodanomics, it seems, is his strong commitment to 2% stable inflation rate as his target. The historically and internationally unprecedented and even dangerous amount of accumulated stock of base money has been basically arising from the stubborn commitment to achieve the 2% inflation goal. Can this quantitative goal not be changed or modified, particularly in view of various drastic changes of global and Japanese economic conditions since the outset of Kuroda regime.

   In fact, the commitment to the 2 percent goal has been made between BoJ and the government in January 2013 in the Accord of the Government and BoJ, prior to the time Mr. Kuroda took the office of BoJ. This means that the commitment to the 2% goal cannot be changed unilaterally by BoJ. One may ask whether the government and BoJ consult with each other seriously as to change this commitment. This seems unlikely in view of the fact that both prime minister Abe and Mr. Kuroda stated recently on different occasions that they respect the Accord and has no intention to change.

   However, the Accord has a more comprehensive content rather than sheer commitment to the 2% target. It emphasizes that fiscal policy and monetary policy need to support with each other to achieve this goal. Interpreting this notion honestly, the Accord asks the duty of fiscal policy which the government is responsible as well as the duty of BoJ. One may ask whether the government is satisfying the required task of achieving and maintaining the healthy fiscal conditions. Some observers have speculated how much Mr. Kuroda was shocked by the prime minister’s announcement of postponing the timing of consumption tax rate from 8 to 10 shortly after Mr.Kuroda executed the second bazooka in October 2014.

  FED of the US and ECB of Europe have altered the massive monetary easing policy much prior to achieving the targeted inflation rate, perhaps by considering changes of economic conditions flexibly. One is left with a question why only BoJ cannot change the commitment more flexibly with changes of important economic conditions.

3.   Exit strategy:what to plan and how to proceed?
   With the huge accumulation of the stock of base money in the process of extra-ordinary dimensional monetary easing, the size of balance sheet of BoJ has increased extra-ordinarily, too. The aggregate size of base money grew as much as the size of Japan’s GDP recently.

  The US FED expanded supply of base money massively after the Lehman shock, but the total amount relative to US GDP when FED started normalization remained only 20%. The normalization process of the FED has taken several years since, and is expected to take another several years until it attains the reasonable equilibrium. In view of the experience of FED, the exit prospect for BoJ is unimaginable.

   The size is a problem because in the process of exiting the huge asset of BoJ will have to be absorbed by the global market. Given the size as much as GDP, selling the huge amount in a way not to incur excessive reactions on the market within a reasonable time horizon is extremely difficult. We need to plan the process very carefully mobilizing all the possible expertise and information.

   In the case of BoJ, there is a more serious problem than a problem of sheer size. That is, the most of the JGB purchased by BoJ from commercial banks are kept as checking account of BoJ. The negative interest rate imposed on the deposit of commercial banks and other financial organizations kept as checking account was only a very minor portion of the total amount of their checking account. The total amount has reached the amount of 300 trillion yen. The problem is that the most of it is paid a modest interest rate as 0.1% by BoJ.

   When BoJ tries to initiate the process of normalization, the market interest rate will increase. If the interest rate increases sizably it will increase the loss of BoJ dramatically. For instance, if the interest rate goes up to 1%, the interest payment to the checking account of commercial banks and other financial institutions will increase up to 3 trillion yen.

   Since the equity capital or net worth of BoJ is not that large, this massive payment may well threaten the healthy financial balance of BoJ. Although BoJ may not bankrupt as some critiques comment, this may well jeopardize the credibility of Japan’s central bank. Lowering of credibility of the central bank may well lead to many undesirable consequences such as falling down of exchange rate etc.

   Japanese economy is entering into an extremely critical phase in these years where it   needs alert, sensible and responsible policy determination and execution, especially because the global economic conditions are getting worse since the abnormally long prosperity of the last decade is expiring and drastically destructive events are taking place such as Mr. Trump’s selfish and ultra-nationalistic policy, Brexit and increasingly unstable European economy, rapid decline of Chinese economy, deteriorating economic conditions of emerging economies. And, lagged response of Japanese economic policies to tackle  issues of aging of population, dramatic technological change and dangerously accumulated government fiscal debt. Facing with these issues, the challenges for Japan’s financial policy are getting ever more critical and pressing.

Free Education Policy and Its Evaluation

Ⅰ.   Introduction

   Free education policy is a hot issue in Japan both as an important economic strategy as well as a political agendum.

   What exactly is meant by “free education policy”?  Japanese education system as prescribed by Article 1 of the Basic Education Law comprises of 6 years of elementary school, 3 years of junior high school, 3 years of senior high school and normally 4 years of college or university. Since Japanese constitution stipulates education in elementary school and junior high school as compulsory, publicly established these schools are free of charge.

   Education of other levels such as nursery schools and kindergarten for the very young and senior high schools and college and still higher levels such as graduate schools for higher education charge fees for students.

   The policy proposal for “free education” therefore means in Japan to make education for the very young and students for higher education free of charge or reduce fees or tuitions by subsidies.

   Prime minister Shinzo Abe has expressed his keen interest to promote free education as an integral policy of the nation’s human resources development strategy. He advocated free education increasingly vocally in recent years. He picked this policy as a major public promise of Liberal Democratic Party in its campaign for the general election, namely, the election for the House of Commons, in October 2017.

   Interestingly, in this election, all the political parties who nominated their candidates upheld “free education” as an important public promise for voters.

   Since LDP won a land-slide victory in this election, they had a strong momentum to realize the free education policy after the election. It took more than a year to materialize the details of the policy with backing of the budget ready to implementation.

    The policy was formulated so hurriedly that the discussion at the Diet, by experts or even within LDP on examination of its needs, implications and empirical evidence for effects has been scarce and much less than needed. 
     In this essay, I would like to review the intent of Abe administration to implement free education policy and its background, and then review the process of policy formulation and finally evaluate the need, effects and issues of the policy which is going to be implemented from this year.

 
Ⅱ.   Strategic intent and background of free education policy

   The strategic intent of Abe administration for free education policy is that free education is a primary means to promote human resource development. Abe administration put up human resource development strategy as an integral pillar of economic strategy package of the third phase of “Abenomics.”
 
    Abenomics is a well known package of economic policies launched from the beginning of Abe administration since December 2012. The first stage of Abenomics comprised of three arrows, namely, monetary policy of extra-ordinary dimensional easy money, active and dynamic fiscal policy and growth strategy.

   The second stage of Abenomics started since the end of 2015, which consists of new three arrows, namely, growth strategy to attain 600 trillion yen GDP in 2020, policy to increase labor force participation of females of child rearing age, and policy to enrich old age nursing system to reduce burden of family care so that relatively aged people can participate to labor market. In short, the second stage Abenomics emphasizes strengthening supply side capability of the economy by means of encouraging labor supply and productivity increase by facilitating technological innovation.

   The third phase of Abenomics was initiated at the end of 2017 in the wake of October 2017 general election and formulated somewhat more explicitly at the outset of the third term Abenomiccs after the election of LDP president in September 2018. The third phase of Abenomics has not been expressed as systematically as the first and second stages. It has been prepared during the second stage and focussed more specifically on human resource development and technological innovation.

   To shape its focus, there have been two major background factors: one is the increasingly severe labor shortage and the other is the rapidly intensifying global competition of new technologies.
 
   Labor shortage in Japan, both in terms of quantity and quality, is stemming from two reasons. One is an increased demand for labor arising from demand for reconstruction of areas devastated by major earthquakes and  Tsunami in North-eastern part of Japan and for enriching infrastructure for Olympics and Paralympic games in 2020. The other is a more fundamental issue due to a long-run reduction of population which reduces particularly supplies of young labor force.

   Intensified global competition of new technologies, particularly of the so-called 4th industrial revolution and more specifically 5G technologies provides another critical background changes. Still another is the prevailing trend for a longer span of working life in the era of longevity of 100 years, which heightens the need for continuous upgrading of skills for a prolonged life career.

   These background factors aggravate the need for well-skilled young labor force. Having been increasingly aware of these factors, Abe administration began to emphasize the need to increase labor supply of the current labor force and to increase birth rates on the one hand, and upgrading skills of people, particularly of the young,  on the other.

   Free education, it seems, is believed to be by prime minister Shinzo Abe and his policy staff as one of the most important and effective means to meet theses demands, namely, increasing the labor supply, increasing the population and enhance skills of people.


Ⅲ.   The process of formulation of free education policy

   In this section, let me review the development of policy ideas and the process of policy formulation of free education.

   In March 2017, LDP committee to think about  economic and fiscal policies after 2020, headed by Mr.Shinjiro Koizumi, proposed an idea of children insurance to finance the cost of providing free education.

  In April 2017, LDP committee for fiscal consolidation rejected the idea of issuing government bond to finance free education.

  On June 2, 2017, the government disclosed the draft for the Basic Direction of Economic Fiscal Policy Management for FY 2018 which states that free education for children younger than age of elementary school needs to be implemented soon.

  On September 25, 2017, prime minister Shinzo Abe declared that he will invest 2 trillion yen to promote “Human Resource Development Revolution”, the new catch-policy of Abe administration.

   Prime minister Abe’s declaration obviously intends to appeal to voters for the forthcoming general election. Indeed, Mr. Abe explained the reason why he calls forth general election in October 2017 as he wants to change the use of the expected increased tax revenue accruing from increased consumption tax rate from the ongoing 8% to 10%.
    The increased tax revenue which is expected to be 5.6 trillion yen was supposed to be used mainly to repay the government fiscal debt. Mr. Abe appealed to the voters that he wants to spend much of the increased tax revenue to finance “free education” and to partially enrich social security. In order to ascertain the support of people for this changed use of the tax revenue, he told that he will ask the public endorsement by means of conducting general election.

   Toward the general election of the House of Commons, scheduled for Oct.22, 2017, all the parties which put up candidates put up “free education” policy.  Let me quote, LDP free education for the very young, financed by increased tax revenue accruing from increased consumption tax rate. “Kibou” (hope) Party for the very young and senior high students financed by taxing on internal reserves of corporations, Komei Party for the very young and senior high students by increased tax revenue accruing from increased consumption tax rate, Communist Party for the very young up to college students financed by new taxes on large firms and rich people, Constitutional Democrats, Ishin(new restoration), and Social Democrats also propose “free education” policies.

   On October 28. prime minister Abe asked the industrial community to pay 300 billion yen to supplement the budget for free education, which Mr.Abe said to cost some 2 trillion yen.
 
   Following prime minister Abe’s lead, several task forces of LDP discussed to determine policy details such as whether or not income ceiling be set, whether or not unapproved nursing schools can be made eligible for free education. The government also asked some scholars and knowledgeable people to set up experts task force to discuss policy details and propose recommendations.

   By June 2018, basic ideas for policy details have been more or less specified by the government both free education for the very young and also for senior high school and college students.

   Toward the end of 2018, these plans have been formulated specifically which are to be written in the annual budget for FY 2019. These plans are vouched by 2 legislations: namely, “Amendment of Children Bearing and Fostering Assistance Law,” and “College and Higher Education Study Assistance Law.” And the final plan with budgets was authorized and determined in the cabinet meeting in the morning of February 12, 2019.

   The government expects that the total annual cost of providing free education will be 1.5364 trillion yen, of which for young pupils 776.4 billion and for students of higher education 160.0 billion yen. Let me describe main points as follows:

  For kindergarten and nursery school pupils:
     Age 0 to 2, free education(for unapproved, free up to 42000yen a month. Given for households exempted from house tax. Starting October 2019

      Age 3 to 5, free education(for unapproved, free up to 3700 yen a month. Given for all households. Starting October 2019

    For senior high school students:
        Senior high schools study assistance(annually 120 to 300 thousands yen) for households with less than 9.1 million yen annual income,   
         Senior high schools grant scholarship(annually 30 to 140 thousands yen) for households with less than 2.5 million yen annual income.
     For colleges and universities:
         Grand scholarship( annually,  350 to 910 thousands yen) for households exepcted from residents’ tax. starting from April 2020.
         Tuition waiver( annually 170 to 700 thousands yen) for households with less than 2.7 million yen income
         Reduction of entrance payment( 70 to 280 thousands yen)

 
Ⅳ.   Critical evaluation of free education policy

   Having reviewed the process of policy formulation and the contents of the free education, let me make a few points of critical evaluation.

   The total annual cost of proposed free education for FY 2019 is 1.5364 trillion yen, which is a huge amount of money. Provide education free or with as low burden as possible itself is valuable and meaningful since education of the population is a very important policy objective to manage the country.

   The important question is whether the way such huge amount of money paid by the public is effective and meaningful for the purpose of the policy.

    Since in Japan, the ratio of people who attend schools is rather high even among the advanced nations, i.e. 56% of youth are attending 4 year or 2 year colleges, and 95% of children younger than the enrollment age of elementary school are attending nursery school and kindergarten.  Given this high rate of attending which is already attained, increasing the quantity or the number of attendants is not as an important objective as much as enhancing the quality of education.

    Given this high attendance ratio, providing free education or subsidies to reduce the cost of education as is proposed by Abe administration may well yield unintended mal-effect of increasing differentials particularly of the quality of education, acquired knowledge and skills, among the same cohort of students. This is because relatively wealthier families will spend the additional income provided by the government to further enrich the ability of the children while relatively poor families may well use the additional income to supplement their limited family income.

  Ms. Makiko Nakamuro of Keio University reports the results of their empirical research on human capital investment across different age classes which shows that the effect of investment is much higher younger age cohort. She infers from such research findings that the policy to enrich human and other endowments on education for young children of particularly the area where people are relatively poor will be more cost effective as education policy. She worries the debate in Japan which is often made on casual observations rather than reliable empirical research. Makiko Nakamuro, “Free education is a wrong policy to enlarge differentials” Bungei Shunjyu August 2017.

   The problem of “free education” policy of current Japan is that the objectives of the policy is not well defined and the huge amount of precious money paid by tax payers  is used on casual observations or subjective conviction without reliable evidence of  research. The policy was formulated hurriedly with hardly any solid and systematic discussion or debate. I wish that the “free education policy” was not intended simply to appeal to voters by scattering additional money to attract their votes.

Belated hike of consumption tax and its implications

Ⅰ.  Introduction

   Following the declaration of prime minister Shinzo Abe in October 2018 to increase the consumption tax from the ongoing rate to 8% up to 10% at the beginning of October 2019, the necessary budget to accommodate this tax increase has been written in the annual budget plan for FY2019 which was disclosed at the end of 2018. With these steps, the consumption tax hike which would have been realized much earlier finally will be executed in October 2019.

  In this essay, I will review the prolonged process to prepare and execute the increase of consumption tax from 8% t0 10%,  the current policy package to execute the consumption tax increase and discuss its implications.

 
Ⅱ.  Review of the process of consumption tax hikes

   Consumption tax increase has been a major home work left for Abe administration from the preceding two Democratic Party administrations led by prime minister Naoto Kan and prime minister Yoshihiko Noda. 

    At a G7 conference of finance ministers held in Canada in 2010, the then minister of finance Mr. Yoshihiko Noda of Naoto Kan cabinet made an international commitment that Japan will increase consumption tax from then 5% up to 10%. This was the response of Japanese government to the international community of fiscal policy who were deeplyconcerned about Japan’s excessive accumulation of government debt in a way to show the determination to enhance fiscal discipline of Japanese government. Mr. Noda’s commitment also had an implication to alter the compositional balance of direct and indirect taxes by way of increasing the proportion of tax revenue of consumption tax vis-a-vis income tax in the increasingly aging society of Japan.

   In that year, Kan administration also set forth the fiscal consolidation plan in which the government plans to reduce fiscal debt from 2010 and attain zero of the primary balance by 2020. To achieve the goal of the plan, appropriate increases of consumption tax has been regarded imperative.

   To pursue that goal, three party agreement has been attained in 2012 by Democratic Party of Japan, Liberal Democratic Party and Komei Party in which they agreed to increase consumption tax rate from 5% to 8% in April 2014 and 8% to 10% in October 2015.  In December, Mr.Shinzo Abe took the office of prime minister and Abe administration stared. Abe administration naturally was supposed to attain the plan of
3 party agreement. In other words, increases of consumption tax have become the home
work for Abe administration.

   Abe administration executed the committed increase of consumption tax rate from
5 to 8% at the beginning of April 2014. Since 3%point increase was a major increase,
consumpers reacted dramatically as expected. Prior to the tax increase, they rushed to
buy goods and services which increased the GDP of first quarter of 2014 as much as
4.9% at annual rate, and then the trend was reversed after the tax hike. Consumption shrunk sharply in the second quarter of 2014 as much as minus 7.1% of GDP annual rate.

   Consumption has remained quite weak for a long time since then and the economy seems
to have lost its viability. This phenomenon of a negative effect of tax hike on consumption  apparently has become the serious concern of Abe administration. While the increase of
consumption tax was regarded as an important step toward the comprehensive reform of
tax and social security, only one percent worth of the increased revenue has been used for social security, the basic aim of enriching and fortifying social security has barely been satisfied.

   Prime minister Shinzo Abe grew increasingly nervous about the effect of tax increase
on economic performance. He ordered ministry of finance to coin a good idea to mitigate
the impact of tax increase on consumers, particularly of low income consumers. Ministry
of finance proposed an idea of partial refunding to lower income people utilizing the tax
payer identification number system which was to be introduced. However, this requires
low income consumers to prepare necessary documents to ask for refunding. Warring
about cumbersome burden on such consumers, Komei party strongly opposed against
the idea of ministry of finance.

    Komei Party instead strongly proposed to introduce reduced tax rate for necessity items such as food. This reflects their notion that low tax rate for foods is helpful for low income
people who the party regards their critical supporters. This idea has been reportedly pushed
forward strongly by female segment of the party which often has an important influence on the party decisions. The reduced tax rate of food in effect has a regressive impact since
the wealthier people spend much more money on food. In the political process, however,
the strong recommendation of Komei party’s reduced tax rate was adopted as a political compromise even in spite of critical advices of tax policy specialists. This debate ended
up with introduction of reduced tax rate for foods for prospective tax increase for 10% in the form of LDP and Komei party agreement.

   Prime minister Abe stated that he will decide the next tax hike in November 2014.
Many experts such as Ministry of finance officers,  economists including IMF specialists
argue that consumption tax should be increased to 10% as soon as possible on the ground
that economic performance is good, there is no guarantee that the economy will be better later and no important election is scheduled.

   However, on November 18, 2014, prime minister Shinzo Abe declared that he will postpone the timing of increasing consumption tax rate to 10% for a year and a half to
April 2017. He also announced to call for a general election to ask the view of the people
because he changed the public promise of the date of consumption tax increase and declared to resolve the House of Representatives on Nov.11 and set the voting date
on December 14.  The result of the election was a land slide victory of LDP and Komei
party.

   In spring of 2016, prime minister Shinzo Abe began preparing theoretical reasons to
possibly postponing the timing of increasing consumption tax rate further including inviting
eminent economists such as professors James Stiglitz and Paul Krugman. Having listened to their views Mr.Abe told that he learned that the world economy entails downward risks,
monetary means have limits to counter such risks, fiscal spending is necessary, therefore
there remains little room for an economy like Japan to raise taxes.

   On June 2, 2016, prime minister Abe announced to postpone once again the timing of increasing consumption tax rate to 10% to October 2019. He said it is necessary to prepare for countering probable global downward risks. In July 2016, prime minister Shinzo Abe hosted G7 summit at Ise-shima national park in Mie prefecture. He urged to the leaders of
the world the necessity of fiscal stimulus which many leaders did not quite appreciate. Mr.
Abe said that if the world economy suffer from a major shock such as the Lehman’s class,
the timing of increasing consumption tax will be postponed further. While many national
leaders and experts did not really listened to Mr. Abe’s warning, he is lucky enough that
a major shock hit the global economy after June 23, namely, British national referendum
for “Brexit,” which exerted at the moment even the larger downward shock to stock market
than the time of the Lehman shock.


 
Ⅲ.  Policy package to increase the rate of consumption tax

     In October 2018, a year prior to the planned timing of consumption tax increase,prime minister Abe reportedly made up his mind to execute the planned increase of consumption tax rate from the ongoing 8% to 10%. He has also been ordering the relevant government offices to prepare policy package to mitigate the likely negative impact on consumption due to the increase of consumption tax rate.

   In the evening of October 15, prime minister Abe declared at the extra-ordinary Cabinet
meeting that he will execute the increase of consumption tax rate up to 10% as planned.
And now openly assigned all relevant ministers to prepare economic policy package
to prevent negative reactions after the tax hike.

   The issue of introducing reduced tax rate for foods gives rise to many problems at
the shops as well as the ministry of finance. For small businesses dealing with dual tax rates, the government has been advocating to equip themselves with necessary cashing machines and relevant ordering and receiving facilities.

   The ministry of finance is faced with the problem of how to secure budget to make up for the reduced tax revenue due to reduced tax rate for foods.  The forgone revenue is estimated as much as 1 trillion yen. The ministry plans to carve out 700 billion yen from
increasing tobacco taxes etc, and the rest of 300 billion yen from hopefully increased
revenue from small businesses, who have been exempted from reporting of consumption tax revenue, now begin to report consumption tax revenues in order to secure business
with large firms after introducing “invoice” system.

   The exempted small businesses are about 5 millions. Since they are exempted, they are
unable to issue invoice. Since large firms cannot write off consumption tax spending in transacting with exempted small businesses who cannot issue invoice, they tend not to
have business with such exempted small businesses. However, once the invoice system is
widely introduced, some of these small businesses will shift to non-exempt businesses in order to secure business transactions with large businesses. Ministry of finance expect that
the shift of such small businesses will increase tax revenue as much as 300 billion yen.

   In early November, Komei party presented a policy proposal to mitigate the negative impact of consumption, particularly of low income consumers.Their proposal includes:
 (1) implementing reduced tax rate system surely, (2) providing gift certificates to reduce the
burden of households, (3) tax reduction for those who buy houses and cars after the tax hike, etc. While Komei party apparently had a strong influence in preparing economic
policies to mitigate the likely negative effects of tax hike, there remained some skepticism among LDP members about the effects of Komei proposals.

   On November 23, prime minister Shinzo Abe talked about 5% refund for the consumers who bought things without using cash, the idea which has been developed and included
as one of the important items of the final policy package. In the process of preparing the consumption tax related policy package, reduction of taxes of purchasing cars was also
included as an important item.

   On December 22, 2018, the budget plan for FY2019 has been disclosed. The necessary
budget to execute consumption tax hike has been included thereby the increase of consumption tax rate has been formalized.
   The total fiscal budget for FY2019 is 101.4564 trillion yen. In which policy package to
mitigate the possible negative effects is accounted for 2.0280 trillion yen.

    The expected increase of tax revenue arising from 2% point increase(8% to 10%) of consumption tax rate is 5.7 trillion yen, which tax payers are supposed to pay if nothing else has done. In reality, 1 trillion yen is subtracted in the form of reduced tax for foods.
Also, 1.5 trillion yen is substantively subtracted in the form of tree education for very young
and higher education students. After such subtractions, the net burden on tax payers due to
2%p increase of consumption tax rate is 3.2 trillion yen.

   On the other hand, the government stipulates as policy package to mitigate possible or likely negative effects of consumption due to tax hike the following items. They include:
 (1) Refunding for cashless purchases, for 9 months from Oct.2019 till June 2020.
     Refund rate is 5% for small shops and 2% for shops of large chain store networks
(2)  Gift certificates for low income families and infant raising families.
      Up to 25000 yen worth certificate for 20000 yen purchase.
(3)  Housing subsidy, for relatively lower income households, up to 0.5 million yen
(4)   Subsidy for next generation housing such as energy conservation houses.
(5)   Houses imposed 10% consumption tax, income tax deduction eligible period extended
       from 10 to 13 years.
(6)   Reduction of car taxes, cars bought after October 2019, yearly up to 4500yen reduced
(7)   Reduced tax rate for foods for all consumers.

The policy package to mitigate possible negative impacts of the tax hike altogether will amount to 2 trillion yen. Adding tax reductions for house and car purchases would total
approximately 2.3 million yen.

Interpreting this package as additional income for tax payers, the net burden of tax payers arising from the tax hike of October 2019 will be only 1 trillion yen.


Ⅳ.   Implications of this hike of consumption tax and evaluation

   Having learned about the prolonged process of increasing the rate of consumption tax
and the policy package planned by the government accompanying the tax increase, let us
consider their implications.

1.  The prolonged process of consumption tax increase.
    To raise the rate from 5 to 10%, it altogether will have taken 5 years and a half.
Prime minister Abe postponed twice the planned timing of tax increase from October
2015 till October 2019.

     The most pressing issue for Japanese economy, in my view, is the rapidly accumulating
government fiscal debt. Tax increase is an important measure to reduce or control the pace
of increase of the debt. During the four years elapsed by prime minister’s repeated postponing of tax increase, the total accumulated fiscal debt increased by the amount as much as 100 trillion yen. Although the forgone tax revenue during this period which would have been gained is some 20 trillion yen, this repeated postponement certainly aggravated the worsening of the fiscal debt situation for the country.

2. Effects of policy package accompanying the tax hike
   Abe government planned various policy measures to mitigate possible negative effect on consumption due to increase of tax rate. The package altogether amounts to 2 trillion yen.
If subsidies for houses and tax reduction for purchase of cars are added, the total amount would be some 2.3 trillion yen. The government also provides reduced tax rate for foods and free education for certain ages of children and youths which altogether amount to
2.5 trillion yen. These measures make the net increase of tax revenue only 0.8 trillion yen
out of the total of 5.6 trillion arising from 2 %point increase of consumption tax.
 
  Question is what can be done by only 0.8 trillion yen accrued from the precious increase
of consumption tax rate this time. The original purpose was to use the increased tax revenue for fiscal consolidation on the one hand, and enriching social security on the
other. With only 0.8 trillion yen, only very little can be done to pursue these goals.

   Another question is whether such measures would be really effective to increase consumption. Most of measures will certainly increase household income of consumers marginally but its effect of increasing consumption additionally is highly skeptical. Moreover, too much short term incentives provided by such measures may induce negative reactions when such incentives are terminated after a certain period.

3. Negative effect of tax increase and long term strategy to reconstruct the country
   Prime minister Shinzo Abe appears to be so fearful of possible negative effect on consumption by the tax rate increase. He may be preoccupied by the “trauma” of the negative reaction of consumption in the second quarter of 2014.

   But is this economic fluctuation such important to overlook the issue of structural
deterioration of fiscal balance of this country. The enormous accumulation of fiscal
debt for the size of economy may well lead to fiscal or economic collapse of the nation
if the economy is hit by serious shocks. For detailed explanation of this issue, see Haruo Shimada “Aging and Possible Fiscal Crisis: Are There Remedies? FPCJ Press Briefing in the afternoon of Oct. 3, 2018, contained my blog essays “Japan Topics

   One of the reasons why Japanese population is uncertain for the future and cannot be
confident to spend is their worry about the pessimistic notion of fiscal condition of the country. Although most people do not know much about details of the problem, many
of the population have a vague worry and uneasiness for the future of the country.

   It is my view that prime minister Shinzo Abe should have courage and determination to
talk to people the real picture of the fiscal situation of the country honestly, and seriously,
and ask their understanding and cooperation to raise taxes to reconstruct the fiscal health
of the country. The public of Japan must have ears to listen to such serious talk of the leader of the country and particularly his positive view to reconstruct the country for the
future. For my policy recommendation for a long range plan to transform Japan, see Haruo Shimada “Aging and Possible Fiscal Crisis: Are There Remedies? FPCJ Press Briefing in the afternoon of Oct. 3, 2018, contained my blog essays “Japan Topics

Open doors more widely for foreign workers

Ⅰ.  Introduction
 Introducing more foreign workers is viewed as the most urgent and important
issue for Abe administration.
   Toward the end of last year(2018), the law which amends the entry control and
refugee recognition law was enacted. This amendment introduced the new categories to authorize foreign workers to work in Japan. Since the amendment
was carried out hurriedly, there remain many problems to be clarified or decided
to make the revised law work properly when it becomes effective at the beginning
of April 1, 2020.
   In this essay, I would like to explain in some detail the content of the amendment of the entry control and refugee recognition law, discuss its meaning with some
historical perspective and finally present my personal view as to what the legal and
policy system for Japan should take to handle the issue of foreign workers properly
for national interest.
Ⅱ.  New legislation for expanding introduction of foreign workers
   In the very early morning of Dec 8, 2018, the bill to amend the entry control
and refugee recognition law passed the House of Councilors and enacted as the
revised law of the entry control and refugee recognition law. Needless to say,
the bill passed the general assembly of the House of Commons earlier so that
the passage at the House of Councilors finalizes the process of legislation.
   The thrusts of the revised law may be summarized as the following:
 (1) To create the two new categories to authorize the stay of foreign workers including some unskilled workers, namely, “specific skill of type 1” and “specific skill of type 2.”
 (2) To review the revised law 2years after the enforcement taking into account opinions of local governments and others.
 (3) To establish “Entry-Exit Control Agency” to manage the control of entry, stay and exit of foreign workers.
 
   The gist of the new system is the new two categories for workers who can stay and work in Japan.
   One is “Specific skill category 1.” Workers in this category are expected to work in one of the proposed 14 jobs such as agriculture, construction, old age nursing etc. They can work at longest 5 years. They are not allowed to bring their family. There are basically two sources for this category: one is those who spent 3 years of experience in the system of “Training and Working, “ which I will explain in some detail later. The other is those who wish to work in Japan and passed exams of
Japanese language and skill aptitude.
   The other is “Specific skill category 2.” Workers classified in this category are
skilled workers. They can bring their family. The limit of their stay is 5 years but they can extend it. Eventually, they could practically be permanent resident. While Japanese prospective employers are looking forward for category 1, they are somewhat less enthusiastic to category 2.  The workers who experienced stay as
category 1 can be upgraded to category 2 if they pass the the required test.
   Let me show here the number of foreign people who work in Japan. As of
July 2018, the total number is approx. 1.28 millions. Of which, permanent residents
and those who marry the Japanese are 459 000, working students are 297000,
trainees under “Training and Work System” are 258000, highly skilled such as
medical doctors and lawyers are 238000, and others.
   Incidentally, the number of foreigners staying in Japan as of the end of June 2018 is 263, 7251, increased by 7,5403 relative to last year. Of this total, permanent residents are 75,9135, special permanent residents are 32, 6000, students are
32,4000, and trainees enrolled in “Train and Work Program” are 28, 5000persons.
   The government wishes to bring in eventually some 340000 workers utilizing the framework of newly created two categories. The government expects to introduce
in the first year, namely, from April 2019 to March 2020, 47550 workers into jobs of 14 selected industries: namely, agriculture, bldg cleaning, food processing, construction, old age nursing, restaurants, metal fabrication, ship building, manufacturing machines, hotels and inns, car repairs, fishing, electronics and
information, and airport and air craft services.
   In the first 5 years, the government expects to accept 18000 to 36000 foreigners for agriculture and 7300 for FY2019 7300, 28000~37000 for bldg cleaning and 2000 to 7000 for 2019, 26000~34000 for food processing  and 5200 to 6800 for 2019, 30000 to 40000 for construction and 5000 to 6000 for 2019, 50000 to 60000 for old age nursing and 5000 for 2019, 41000 to 21500 for metal fabrication and 3400 to 4300 for 2019, etc.
   The government plans to conclude agreement of accepting workers by March
2019 with governments of 8 prospective countries such as Vietnam, China,
Phillipines, Indonesia, Thailand, Myanmar、Cambodia.
   Prior to April 1, 2020, when the revised law will be made effective, there are
many things which the government will have to clarify or decide. They include,
for example, (1) basic principles to implement the system. The government will
have to decide policies as to avoid excessive concentration of foreign workers in
major cities such as Tokyo, and programs to restrain activities of bad brokers etc.
(2) guide lines for managing the system for 14 industries such as control of the numbers, contents of qualification exams, and specific rules, (3) comprehensive
policies for acceptance of foreign workers such as consolidating receptions,
enriching introductory Japanese language education, and (4) guidance and rules
such as comparable wages relative to Japanese, and other relevant rules.
     There remain a whole host of problems, tasks and hurdles to be solved or overcome not only by the government and municipalities but much more so by
employers who wish to hire foreign workers and local communities in order to accept foreign workers under the newly legislated categories before the law will be enforced at the beginning of April 2020.
 
Ⅲ.   Development of discussions for introducing foreign workers
   Let me briefly review how Japan has been handling the issue of accepting foreign workers in the recent history, and examine somewhat more closely the recent development of handling the issue under the leadership of Abe administration.
The recent action of Abe administration to introduce foreign workers including unskilled or simple skilled categories is perceived to be the major change of the
policy stance of the Japanese government on this issue, particularly by international
community, since the Japanese government has been regarded as having preserved “seclusion” on this issue.
    While Japanese government has resorted to mobilize foreign workers soliciting
from Asian countries particularly of Korea and China during the period of Japan China war and the Pacific war for about a decade prior to Japan’s defeat in 1945. this issue should be discussed separately in the different context from our discussion
of foreign workers of this essay.
   During the postwar economic development period since the mid-1950s, Japan has faced at least three phases in which the need to introduce foreign workers was keenly felt.
1.  The first phase: 1960s
    The first was the 1960s when Japanese economy grew rapidly as often quoted ad Japan’s economic miracle in international community. The economy grew by in average 10% for more than a decade from the beginning of the 1960s until 1973
when the economy collapsed by the “oil shock.” During this period of rapid economic growth, labor demand expanded dramatically to supersede even the
ample supply of young labor force at the time. The need for introduction of foreign workers was voiced strongly from industrial community.
   The government took the situation not lightly and seriously examined whether Japan should accept foreign workers. The conclusion reached particularly at the
summit of Labor Minister Hirohide Ishida and relevant ministers was not to open
the country for foreign workers.
    I happened to have been working closely with government experts on this issue as a young scholar of labor economics shortly after returning from the US where I took PhD in labor studies. I was assigned as chairperson of the task force to examine and make a policy proposal. The task force was comprised of responsible officers of 4 ministries, namely, Labor, Justice, Foreign Affairs and Trade and
Industry. At the end of study period, we proposed a policy entitled, “Train and Work
Program.” This has been the prototype of the policy scheme which has been used to control the foreign workers until now. And our task force has become the core of the subsequent body, JITCO or Japan International Training Cooperation Organization, to administer the operation of the program. The operation of JITCO
started toward the end of the 1960s.
   I, as chairperson, drafted the initial paper for the policy. In my mind, I had a keen feeling of caution not let employers to abuse foreign workers. Before drafting policy proposal, I visited many countries both of sending workers such as Philippines and accepting workers such as West Germany. West Germany was well known for having accepted a large number of foreign workers from Turkey and other countries, but they suffered serious problems subsequently of their social integration and financial burden of social spending to take care of them.
   In my view, if Japanese employers who want to make use of foreign workers can easily hire them, they may well abuse them by poor working conditions and low payment. This is because these employers want to use foreign workers because they cannot afford good working conditions for even to Japanese workers. To minimize such problems, I proposed to impose the employer to pay for 2 years to train the trainees and then can make them work by the expression of letting them experience the real work. With these conditions imposed, the employers who dare to participate to the program would be quite limited, and this is exactly my intention to eliminate unqualified employers.“Training and Work Program” for foreign workers  which the Japanese government adopted by our recommendation has been quite
stringent, perhaps the most stringent in the world.
2. The second phase: 1980s
   Second was in the 1980s. Japanese economy grew rapidly after having emerged from the damage of the oil shock. Particularly after the mid-1980s, the economy
expanded by the wave of the “bubble.” The bubble has its root by the notorious Plaza accord. This was imposed by Mr.Nicholas Brady, who later became treasury secretary of the US by which Japan was forced to increase exchange rate of the yen. Fearing for its depressive effect on export, Japanese government massively increased fiscal spending and BoJ decreased interest rate to create the domestic demand. This created the bubble since the liquidity created was too large for the
economy to absorb. The bubble economy inflated pseudo labor demand which
solicited the argument of introduction of foreign workers.
  Employers of construction and low skill services wished cheap foreign labor. In
fact, the number of illegal foreign workers has grown large to the order of even a million although there were not accurate and reliable estimates. Debate on the issue of foreign workers was heated. Some argued that Japan should open its labor market for foreign workers, while others warned about demerits of hasty introduction. The bubble collapsed at the beginning of the 1990s, and the debate and even interest on the issue of foreign workers diminished accordingly.
 Incidentally, I wrote a book “Japan’s Guest Workers” published in 1994 by University of Tokyo Press to explain my thought partly to participate to this debate. I was and still am a part of the proponents of opening the market for foreign workers. However, I emphasized that the country should provide full fledged
human rights as a precondition of accepting foreign workers. I will discus my
view in some detail later. If you are interested to know what I assert, please look up my book.
3. The third phase: 2010s
   Third has been the more fundamental interest and concern about introduction
of foreign workers which emerged gradually and grew increasingly keen in the 2010s, largely reflecting the intensifying labor shortage stemming from increased labor demand arising from reconstruction of devastated area by the gigantic earthquake and Tsunami in Northeastern Japan in 2013 and also preparing for the forthcoming Tokyo Olympics on the one hand, and long-term demographic change
of Japanese diminishing population on the other. It is in this context under which
Abe administration proposed to create a new system of introducing foreign workers.
4. The process of legislation by Abe administration
   Shortly after Abe administration started, the government held a conference of
related ministers on the issue of introducing foreign workers in April 2014 and
decided emergent measures to extend the period of authorized stay in Japan from
3 years up to 6 years. To do so the government proposed to expand the “Train and
Work Program” which has been practiced for 40 years.
  In September 2015, private sector advisors of the government committee of
Economic and Fiscal Policies prepared a plan to extend the authorized period
of stay up to 8 years.
  In November 2016, the entry control and refugee recognition law was amended
to add a category of old age nursing service and expanded the restriction of “Training and Work Program.”
  In February 2018, prime minister Shinzo Abe declared in the committee on economic and fiscal policies that he wants to show by summer the direction to
expand acceptance of foreign workers.
  In the report of the government committee on  Economic and Fiscal Policies
which was disclosed in June 5, 2018, new directions have been written that
the number of foreign workers who work in Japan and possibly stay for a long period should be increased, and legal arrangement should be made to enable
this goal. This statement in the report became the official starting point to
expand the acceptance of foreign workers by amending the current “the entry control and refugee recognition law.”
   In October 24, prime minister Shinzo Abe emphasized the need to introduce
foreign workers who can be productive force right away. Following prime minister’s
strong message, the issue was debated intensively in the general affairs committee of Liberal Democratic Party and finally agreed that the entrance control law should be amended.
    On November 11, 2018, the issue was debated in the budget committee of the House of Commons. In that committee, Mr. Nagatsuma, the deputy representative
of Constitutional Democratic Party asked the prime minister if the amendment he
proposes is to assimilate foreigners to the Japanese. Prime minister Abe answered
sternly that he never think of “immigration” policy.
    Opposition parties proposed various alternative plans for introducing foreign
workers. It took about a month for the debate in the Diet. At one point, it was
revealed that one of the reports prepared by Ministry of Justice on the issue of
disappeared trainees due to poor working conditions had some mistakes, and
the debate has been suspended for some time. Nevertheless, LDP has never
changed their basic assertion throughout the process. And eventually, in the very
early morning of December 2018, the bill was passed in the general assembly of the
House of Councilors and enacted as a law to amend the previous law of the entry
control and refugee recognition as noted at the beginning of this essay.
    As can be seen well in the above, the process of this legislation was short and the debate was not thorough or sufficient, which opposition parties criticized repeatedly.
But the law was enacted hurriedly within a short period. The process was hasty and the discussion was not comprehensive nor deep in spite of the nature of the proposed amendment which is effectively change the basic stance of the government in the postwar period. Abe administration must have had a special reason to hasten the process, possibly to appeal to the voters of the forthcoming House of Councilors election in July 2019.
Ⅳ.   Remaining issues and Shimada’s proposal.
     Since the discussion was not enough and the period given for the debate in
the Diet was rather short, there naturally remain many problems to be examined further and necessary remedies or policies need to be given or formulated. Some
of those problems will be taken up and taken care of, hopefully, during the remaining period until April 2020 when the amended law will be enforced. Or
one may hope that such remaining problems will be picked up and discussed
by April 2022 when the law prescribes to be reviewed.
   Without going into details of these issues, let me conclude this essay by
introducing my own idea about the fundamental and basic problem of Japan’s
way of handling the issue of foreign workers. That is, in short, the absence of
immigration law in Japan.
   Instead, Japan currently has only two pieces of laws to control and govern the issue of foreign workers, namely, the entry control law and refugee recognition law.
The former is a law which prescribes the procedural rules and has nothing to do
to the basic principle or spirit of accepting foreigners who would like to come to Japan to become citizens of the country, and the latter is a law which prescribes
rules to handle refugees for largely humanitarian viewpoint.
   The current amendment of the entry control and refugee recognition law is
practically the expansion of the government program of “Train and Work,” which
I myself have involved in writing the preliminary draft as I mentioned earlier.
The important point about this program is that it deals with foreign workers as
a temporary help and not the permanent resident. The readers of this essay may
have been noticed that I never used the word “immigration” or “immigrant” to express entering foreign people or workers. This is because the foreign worker
discussed in the process of legislation were “worker for temporary help” and
not an immigrant, namely a candidate for the permanent resident or a member of Japanese society.
   In a Diet session, prime minister Abe decisively answered to the question of Mr.
Nagatsuma that by this amendment he never means to permit “immigration.”
   What I would like to propose is that Japan must accept those who want to work
and stay long in Japan and become permanent resident as “Japanese citizens” and
the member of Japanese society.
   To accomplish this goal, there are two basic prerequisites: One is appropriate
qualifications for them to become Japanese citizens and the other is to provide them with full-fledged human rights for them.
   On the question of qualification, it is natural that any country which accepts foreign people want them to have possibly highest qualification such as skills,
abilities, academic achievements, special talents and assets etc. This is because the nation state is not a social welfare organization. For the country to accept foreign people as the members of the country, the incumbent citizens must be prepared that
they marry with them or their children so that the blood will mix and they occupy
part of the assets of the nation or inherit assets of the incumbent citizens, therefore,
they naturally wish to share such rights and opportunities as citizens of the country with the possibly highest qualified people.
   On the question of human rights, I would like to emphasize that incoming foreign people should be provided full-fledged human rights, for example, right to receive unemployment benefits, receive injury compensation, pension benefits, rights not to be discriminated in obtaining housing, no discrimination at the workshop and not for children’s education, and voting right in local elections etc. If any one of these rights are unavailable, one cannot enjoy the life of an ordinary citizen. Only right which may not be given without relevant conditions is voting right for national elections.
    It is my view that when these rights and qualification requirements are evidently written in the comprehensive law of immigration, many issues left without resolved
about introducing foreign workers will be solved and clarified. The current law of
entrance control is only a law of procedures without any philosophy or strategy
to deal with foreign workers. What Japan needs now is to have national consensus
as to what kind of country we should create and what kind of people and workers
we wish to invite from from foreign countries. To form such consensus the whole population of Japan should spend enough time to discuss and experience ample
opportunity to associate foreign people. This is perhaps much more important
task for the government should lead than a topic like amending article 9 of the
current constitution which Abe administration is sticking to.
     It is curious that why Japan does not have immigration law which many
advanced nations have. Incidentally, Ms.Min Jeong Lee, Bloomberg News, kindly informed me that Korea does not seem to have the immigration law either. I do not know why Korea does not have it and have no idea to assess the reasons why for
Korea. For Japan, there has been no need to have immigration law as such
during the early period of industrial development of the country until the mid-
20th century because Japan has been a country having excessive population
and kept sending people to such countries as the US, Brazil and Manchuria
in China. It was only after the beginning of the 1960s when Japan began to
need foreign workers to support the economic growth and more recently to supplement labor supply which has been shrinking due to a long term
population decline.
    There may be multiple reasons why Japan does not have, or not even intend to
have as prime minister stated in the Diet debate. Cultural resistance may be one
reason, which is also seen recently in many European countries where people resist acceptance of foreign immigrants or refugees. In Japan, I wonder if people after the defeat of the WWII has a psychological resistance against
grading people because of their historical trauma of war time control of foreign people by Japanese military. This is an important issue to be studied for the future.

Prime Minister Shinzo Abe and his Prospective Legacies

Ⅰ.   Introduction

  1.  Prime minister Shinzo Abe and his ambition for legacies

       Prime minister Shinzo Abe won the election for the president of Liberal Democratic
      Party. Since the next election will be 3 years later, he will continue to be the president
      of LDP until September 2021, and if nothing destructive happens, he will most likely
      continue to be prime minister until then. If he will complete the prospective three
       yeas as the prime minister, he will make a record of the longest service as prime
       minister in Japan’s constitutional history.

         For any political leader who stayed in the office for a long time, he or she would
       usually like to leave legacies which the public will remember for a long time or leave
       his or her name in history of the country. Mr. Shinzo Abe will probably not the
       exception. Let me propose some subjects for prospective legacies which Mr. Abe would
       most likely to consider, and examine whether they will become good legacies for him.

2.  Achievements of his predecessors

        Prior to considering prospective legacies for Mr. Shinzo Abe, let me remind of some
       memorable legacies which his predecessors have left.

         In the sphere of international politics, Prime minister Shigeru Yoshida signed the San
       Francisco Peace Treaty, which permitted Japan to re-enter the international world as
       an independent country, Prime minister Ichiro Hatoyama restored diplomatic relations
       between Japan and Soviet Russia, Prime minister Eisaku Sato realized the reversion of
       Okinawa, Prime minister Kakuei Tanaka restored diplomatic relations with China, and
       Prime minister Jun’ichro Koizumi agreed the joint Pyong Yang declaration with Kim
       Jon Il and successfully made some abductees return to Japan.

         In the aspect of Japan’s domestic policy or economic policy, Prime minister Kakuei
       Tanaka accomplished the reconstruction of Japanese archipelago, Prime minister
       Yasuhiro Nakasone attained privatization of the national railway system, and Prime
       minister Jun’ichiro Koizumi realized privatization of the postal system.

          How about prime minister Shinzo Abe?  Let me pick up several subjects which Mr.
        Abe seems to or may wish to consider as his legacies.


Ⅱ.   International legacies
      In the area of international achievements, there would be three major subjects:
     namely relations with the US, China and Russia.

  1.  Relations with the US
       When it comes to relations with the US. PM Abe worked hard to establish good
     personal relations with presidents Barack Obama and Donals Trump. His memorable
     speech at the joint session of  US congress in 2015 received good reputation. Mr.Abe’s
     extra-ordinary effort and its results should be appreciated.

       PM Abe worked also hard to accomplish institutional changes such as amendment of
     Japan-US security legislation in such a way that Japan can work to protect the US force
     as an allied force using weapons under the specified limited conditions, reinforcing
     Japan-US cooperation by relaxing the rigid principles of limiting weapon exports, and
     review and revision of basic security rules to expand weaponry import from the US.
     All of these actions are highly welcomed by the US. While strengthening and
     development of Japan-US relations such as these are important and meaningful.
     However, these achievements may not be “legacy” as much as improvement of
     routines.

 
  2.  Relations with China
        Since the incidence of Senkaku islands conflict in 2015, political relationship of
      Japan and China has been stalled. Only in 2018, the year of the 40th anniversary of
      Japan-China restoration of diplomatic relations, Chinese prime minister Li Keqiang
  visited Japan which led some improvements of diplomatic relations between the two
      countries.  In 2019, President Xi Jinping would reportedly visit Japan. All these 
      development have been promoted not as much by genuine improvement of relation
      ship of these countries as much as the side effect of increasing threat of Mr.Trump
      against China.

         In October 2018, prime minister Shinzo Abe visited China and had meetings with
      President Xi Jinping. Both sides agreed as a result of the meetings to enhance relation
      ship of the two countries. However, there has been hardly any substantive progress.
      For Japan, China relation will become undoubtedly important both economically and
      politically, and it is imperative for both sides to deepen mutual understanding thereby
      enhance mutual trust. However, Chinese leaders undeniably have skepticism against
      political stance of Mr. Abe, and whether of not Mr.Abe himself wishes to foster mutual
      trust in the true sense of the word remains to be seen. Under these circumstances,
      there is hardly any element in China relations to be identified as the source of Mr.
      Abe’s legacy

      3.  Relations with Russia
          Prime minister Abe has met president Vladimir Putin 25 times, thereby fostered
        close personal relations with him. Mr.Abe has a strong interest in the issue of return
        of Japan’s Northern territory, namely, four islands. He seems to have a high priority
        to make “return of the four islands” as his political legacy.
           However, Mr. Putin is a renowned tough and shrewd negotiator, and whether
        the islands would be returned is highly unpredictable. Prime minister Abe took up
        Mr. Putin’s sudden solicitation to discuss Peace Treaty without any preconditions,
        which he made in the meeting of Eastern Economic Forum held in September 2018 in
        Vladivostok. He added to discuss about Peace Treaty on the basis of the 1956 joint
        declaration of the leaders of the two countries. The joint declaration said that after
        concluding Peace Treaty, two of the four islands will be returned to Japan.

          Accepting Mr. Putin’s appeal means to deny and reverse the conventional stance
       of Japanese government which is to talk about the peace treaty only after the four
       islands were returned. Prime Minister’s response to Mr. Putin’s appeal seems to
       violate this conventional stance of Japanese government. It is curious that prime
       minister Abe seems to have responded quite positively to Mr. Putin’s appeal without
       serious discussion that this will alter the basic attitude of Japanese government up
       to now.

           If everything went well, the end result of this negotiation would likely to be only
       nominal return of two islands without Japan’s sovereignty and massive economic
       contribution from Japan to Russia. The basic question about this issue is whether
       the attempt of demanding the return of the islands this time bearing a huge cost
       will really contribute to the national interest. In case some islands were returned
       with huge cost, I wonder if such action will be worth “legacy” to be remembered
       by the public.


 
Ⅲ.   Domestic legacies
  1.  Constitutional Amendments   
        This is probably the matter that prime minister Shinzo Abe wish to accomplish
      as his legacy with the highest priority. To the extent that the determination of
      Japan’s constitution by the hands of Japanese is one of the objectives of
      establishment of Liberal Democratic Party in 1955, wish for amending the
      constitution to make it a “legacy” can be sympathized. However, I wonder
      if pursuing it hurriedly at this time would really contribute national interest.

         What Mr. Abe concretely suggests is to add the sentence of formally admitting
       the existence of the Self Defense Force leaving item 2 of article 9 as it is.
       This is probably the compromise to Komei party and also to critical views
       among the public. However, since item 2 states that Japan will not have any
       means such as relevant industry to build military, the above amendment itself
       is self-contradictory. In contrast, Mr. Shigeru Ishiba’s view which admits Self
       Defense Force or Japan’s Military in a full-fledge way by abolishing item 2 is
       more straightforward and understandable. However, this view should not be
       pursued hurriedly.

          Since contemporary history has been hardly taught at schools, understanding
       of the public is extremely shallow or absent. Asking the public to vote for
       constitutional amendment will only stir up and accelerate futile debates
       between  the right and left-wing people, and far from attaining national
       interest. If political leaders really wish to change the constitution, I think
       they should pursue seriously enrichment of contemporary history of Japan
       and the international community.

  2.   “Abenomics”

          The basic economic strategy, commonly known by the slogan of “Abenomics” is
      an important policy mix, and has attained some appreciable results. I would like to
     spend some space here to examine whether the Abenomics can be worthwhile to be
     regarded as Prime minister Shinzo Abe’s legacy.

         Since Mr. Abe’s administration has continued more than 6 years as of the beginning
     of 2019 and Abenomics has been characterizing the basic economic strategy of the
    administration throughout the 6 years, it is appropriate to examine basic features of
    Abenomics and evaluate them.

        When Mr.Abe took the office of prime minister at the end of 2012, he declared that
    the basic economic aim of his administration is to overcome the deep and chronic
    deflation of preceding period and realize powerful and continuous economic growth
    while at the same time reconstruct the fiscal structure which is ridden by huge
    government debt. To realize such objectives, the administration launched a
    comprehensive package of economic policies, widely known by “Abenomics.”

        Abenomics can be largely sub-divided in two periods: the first phase covers the
    former 3 years from 2013 to 2015, and the second covers the latter  3 years.

        The first phase is comprised of 3 arrows: Arrow 1 is monetary policy by which
    the bank of Japan conducts “extra-dimensional” monetary easing aiming at promoting
   inflation of the rate of 2% within 2years. After 6 years, we discerned that while stock
   prices and corporate profits increased sizably, inflation has not been attained, so that
   the achievement of the first arrow may be graded at best mixed.
      The second arrow is positive and dynamic fiscal policy by which not to hesitate
   massive fiscal spending whenever necessary. While the active fiscal policy has supported
   the basic stability of the economy, the fiscal spending grew to be excessive for the
   government to restore the fiscal balance which the previous administration committed
   in 2010 that the primary balance will be restored by 2020. Therefore the result of the
   second arrow would be evaluated also mixed.

     The third arrow is growth strategy by which the government plans and executes a whole
  set of structural reform policies which are deemed necessary or conducive to economic
  growth. The government issued policy package plans three times:2013, 2014 and 2015.
  These policy plans delineated hundreds of concrete policies for structural reforms. Out
  of them, policies to reform capital markets, corporate governance, agriculture have
  achieved some tangible results but many others such as labor, social security, medical
   service etc did not attain meaningful results, so that overall evaluation is “mixed.”

       The second phase was introduced with an overall catchphrase of “activating all 100
    million people.” By such a slogan, the government meant to emphasize the importance
    of mobilizing the entire working population including marginal female and old age
    people to become a part of active labor force. The government announced a new set
    of 3 arrows: namely, arrow 1: building a strong economy to achieve 60 trillion yen
    GDP by 2020, arrow 2: enriching nursing care for kids so that childrearing females
    can join the labor market, arrow 3: assisting middle aged people to get rid of the
    burden of old age caring so that they can participate to the labor market.

        Increasing labor supply is an important policy for maturing economies such as Japan
     and many “advanced” economies which are suffering from reduction labor supply
     because of population decline. For this reason, Japan’s attempt attracts of attention
     of policy makers of advanced economies. It is notable that Japan has been enjoying
     a marked increase of labor supply of child rearing age of females and old age males
     for the recent decade. This is a positive sign and result.

        In an attempt to increase labor supply, Abe administration has hastily enacted revision
     of “entrance control law for foreign people” in the sense that the government admits the
     new 2 categories of unskilled and skilled workers to stay several years as workers in
     Japan. Whether this new law will help increasing labor force effectively is yet to be seen
     because the law will become effective in April 2020.

         Abe administration has tried hard to enact a new package of laws, with a
       comprehensive name of “Work-way Reform.” This package of laws has initially been
       intended to help increase Japan’s labor productivity which is one of the lowest among
       major economies in the world. The basic reasons are in Japan (1)workers are paid by
       hours and not by outcomes and(2) reshuffling workers are almost impossible. These
       legal restrictions are detrimental for productivity increase in service economy.

          Abe administration proposed to introduce new wage legislation to allow “pay by
       outcomes”and “pecuniary compensation for dismissals.” While the process of debate
       for legislation took 5 years to be enacted in June 2018 and resulted in basic denial of
       these two proposals and,  in contrast, regulation of working hours and for compressing
       wage differentials between regular and non-regular workers has been reinforced much
       more rigorously. Naturally, the overall effect of such a legislation will mostly likely be
       negative for productivity increase in the service economy.(For further details, see
       my blog, 「Workway Reform」, Haruo Shimada, 2018.10.18/
       http://www.haruoshimada.net/blog/2018/10/workway-reform.html)

          A positive advancement has been made as an important policy item of Abenomics
       which is promotion of free trade with other nations. While, Mr. Donald Trump pulled
       the US out of TPP(Trans Pacific Partnership) on day one of his service in the White   
       House, Japanese government led by Mr.Abe worked hard with the remaining 10
       countries for nearly two years and finally at the end of 2018, TPP was basically
       agreed by 11 member countries. This will create a major economic area of free
       trade composing of 600 million people. This will certainly contribute economic growth
       of member economies and will have positive spillover effect to the rest of the world.

         Another major achievement is Japan-EU Free Trade Agreement. This will be agreed
        between Japan and EU in February 2019, which will open free trade relations in a
        large economic zone of 500 million people. This will certainly have positive effects
        to contribute economic growth of member countries as well as the rest of the world.

    In evaluating Abenomics, let me refer to the long-term performance of economic
       growth of the economy. The Japanese economy has enjoyed a continuous growth since
       December 2012 till January 2019, this marks the longest sustained growth in post-war
       period. Incidentally This period exactly matches the first and second term Abe
       administration.

          Many people say that they have not felt “economic growth” or “prosperity.” This is
       not surprising because the average growth rate is only slightly more than 1%. However,
       to the extent that the achieved growth performance is greater than the estimated
       potential economic growth, the economic growth performance of Abe administration
       is certainly appreciable.

           As has been reviewed, Abenomics has attained certain appreciable achievements.
        This has been planned and executed by Abe administration and brought about
        some positive outcomes, though not as much dramatic as one might wish, for
        Japanese economy and the public. Whether one might remember this as Mr.
        Abe’s legacy is up to people who judge.

 
  3.   Fiscal reconstruction

         Finally, let me discuss the most serious problem and challenge for Japanese economy
     and the government.  That is the issue of hugely accumulated government debt relative
     to Japan’s GDP.

 
         Currently, the government accumulated fiscal debt to GDP is 220 to 240 percent. The
     difference of 240 to 220 is up to different definition and measurement of fiscal debt. At
     any rate this is the worst debt in the world, and the worst even in Japan’s history. For
     instance, the same ratio measured shortly after the defeat of the war, namely, 1946,
     it was 205%. It is also expected that the ratio will grow sharply more in the coming
     decade when aging of population will be accelerated because the postwar baby boom
     population will grow more than age of mid-70s when medical cost for the cohort will
    grow discontinuously.

        This much of mushrooming government debt may well lead to fiscal crisis of even
    economic crash under certain conditions. In fact, many countries such as Russia,
    Argentine, Mexico etc have experienced fiscal and economic crisis in recent history.
    Japan cannot claim as an exception. Indeed, shortly after the defeat of the Pacific   
    War, Japan faced a serious crisis of most likely be trapped in default. The government
    at that time conducted a serious of radical measures such as deposit freeze, issuing new
    yen, extra-heavy asset tax as high as 90%. By these measures, the government avoided
    to be swamped in “default” but the majority of population were sacrificed to have to
    lose most of their assets.

       There can be several incidents which trigger such fiscal or economic crises such
    as acute decline of exchange rate of the currency such as recent experiences of Turkey
    and Argentine. Political struggles, natural disasters can also trigger crises. What the
    Japanese economy is currently experiencing suggests a long to medium term trigger
    which may well lead to fiscal and economic crises. That is the shrinking the difference
    between the aggregate net financial assets of households and government fiscal debt.
    The former is currently about 1300 trillion yen, and the latter about 1200 trillion yen.
    The former is gradually ceasing to grow and soon begin to decline because of
    aging of population, while the latter tends to grow more also due to aging of
    population. It seems likely that these two figures will be reversed in 10 to 15 years.

 
       When the economy is faced with this situation, the government will not be
    able to issue new government bonds because the economy will have no net financial
    asset to buy them. Under such circumstances, Japan will have to ask foreign investors
      to buy Japanese government bonds. They will not buy bonds at the current level of
      price which is jerked up by the massive purchase of Bank of Japan. If the bonds are
      purchased at much lower prices, the interest rates will rise and perhaps accelerate   
      once the momentum operates to that direction. It will make the government incapable
      of organizing the budget and private businesses obtain funds to invest, which will lead
      catastrophic collapse of the economy.

         There are 3 major measures to avoid falling into such crises:  they are (1)
       streamlining of government spending, the largest of it is to reduce social security
       spending which is not easy, (2) economic growth, we need a substantive high
       growth which is hard to realize, and (3) increasing tax, which people resist.
       While all three measures are not easy to accomplish, but the most reliable and
       effective is to increase tax.

          Prime minister Abe has been postponing increases of consumption tax twice which
       he has officially promised which resulted in the elapsed four years as much as 100
       trillion yen of government fiscal dept. He declared to increase the promised tax
       increase of 2 percent point in October 2019, but he spent as much as 4.5 trillion yen
       in counter measures to mitigate the possible negative effect of increase of tax, free
       eduction and reduced tax rates for food etc, which left only 1.1 trillion yen, out of
       expected increase of tax revenue of 5.6 trillion yen, to be used for reconstruction of
       fiscal structure.

          Tax increase is very unpopular in any countries, and this is a challenge for any
       politician. Mr.Abe seems to have a deep trauma by his experience of having increased
       consumption tax rate from 5 to 8% in April 2014 when consumption dropped sharply   
       and quarterly GDP dropped as much as 7%. This is probably the reason why Mr. Abe
       is particularly sensitive about the possible negative effect on consumption arising from
       the proposed increase of consumption tax from the ongoing 8% to 10% in October
       2019.

           Japanese economy, however, faces problems of much larger scale: one is the
       possible fiscal crisis as has been discussed above. Another is the deterioration of
       conditions of life of relatively low income people of the population. In fact, the
       living conditions of relatively low income strata of people, which roughly comprises
       about a quarter of population has been getting worse during the period of so-called
      “lost decades” from 1990 till 2010 or so. The major reason behind is the worsening
       of employment conditions. For instance, up to the beginning of the 1990s, the relative
       proportion of non-regular employees has been at most 10%, while around 2010, the
       ratio increased to nearly 40%. Their working conditions both in terms of wages and
       stability of employment are much worse than regular workers. This worsening of
       employment and working conditions have proceeded due to the prolonged stagnation
       of the economy as well as intensified international competition with low wage
       countries.

          Because of their low income and hard living conditions. they find it difficult to
       provide decent education for their children, difficult even to have children and
       further more difficult to even marry. In other words, a large proportion of Japanese
       people are now losing the capability of reproducing themselves.

          To counteract such an issue, we need a much more comprehensive social support
       system for the people. The traditional system of social security, which comprises of
       old age pension, insurance unemployment and medical care, and more recently
       adopted old age nursing is not enough to take care of this kind of social problems.
       We need to provide a much more comprehensive and seamless care for people
       from bearing babies, giving births, nursery cares, education, employment services,
       in addition to unemployment, medical and old age pensions etc. Providing this
       kind of comprehensive cares, which I would name the seamless social safety and
       security system, would need a huge fund.

          Finally, let me propose an idea for solution. This is a 50 year plan to change
       the entire social system of Japan from the young rapidly growing old system to
       the comprehensive welfare system of aged and matured country, like an average
       European welfare state. To realize such a large scale social transformation,
       consumption tax and inheritance tax can play the major role.

          To achieve such a transformation, consumption tax should be increased one
       percent from 2019 until the tax rate reaches 20%. 20% of consumption tax yields
       50 trillion tax revenue. If we continue this level of consumption tax, which is
       equivalent of many European countries, for 25 years, the total tax revenue will
       be about 1200 trillion yen which is large enough to offset Japanese accumulated
       fiscal dept.

           At the same time, it is imperative to provide the comprehensive and seamless
        social safety and security system which provides services for free to the people
        to secure their agreement and support for such a large scale transformation. If
        we spend another 25 years of 20% of consumption tax levy, the country can finance
        such a comprehensive social service system. In other words, if we continue 50years
        of 20% consumption tax regime, we can realize fiscal reconstruction and
        establishment of life-long safe and secured society. If we make use of revenue of a
        remodeled inheritance tax which covers much greater proportion of people at much
         less tax rate, hence a much greater total revenue, we can only shorten the time we
         spend to create our ideal society. (reference:  My blog 「Aging and Possible Fiscal
    Crisis: Are There Remedies? 」Haruo Shimada written on March 13, 2018 for the
   blog “Shimada Talks” /http://www.haruoshimada.net/blog/2018/03/aging-and-
         possi.html)

           This is my proposal for prime minister Shinzo Abe to pursue. This is a worthwhile
         challenge to bet his political life. This is a genuinely valuable and worthwhile legacy
         which will be remembered by Japanese population for centuries in the future.
 

Workway Reform

Ⅰ.  Introduction

 Workway reform. This is the most important element of structural reform which constitutes the growth strategy of Abenomics. The package of laws which delineate the regulations and rules to promote workway reform was legislated on June 29,2018. It took more than three years to be enacted since the act has been presented to the Diet.

   In this essay, let me explain the content of the law, importance of “work way reform” for the growth strategy of Abenomics, and why it took such a long time to have been legislated, and finally evaluate the effectiveness of the legislation to realize the workway reform in Japanese industry.


Ⅱ. Workway Reform Legislation

   The package of workway related acts was legislated in the morning of June 29 at the general assembly of the House of Councilors. Since this package has passed the   House of Commons a month ealier, May 31, this package of laws have been formally legislated and put to effect.

   The package comprises of three major components:
1. Upper limit of overtime work hours
      Over time is allowed maximum 720 hours a year. Should be less than 100 hours a month. Severe penalty is imposed if violated. The regulation becomes effective from April 2019 for large firms, and from April 2020 for SME(small and medium enterprises).
 
  2.Same wage for same work
        Unjustifiable difference of working conditions such as basic wage and allowances between regular and non-regular employees should be abolished.The regulation will be effective from April 2020 for large firms and from April 2021 for SMEs.

   3.  Introduction of hour-unrelated wages
         The new system is to allow paying wages on the basis of performance of the worker rather than the length of work hours. A limited number of professional workers can be applied this system so that they are exempted from the existing work hour regulations.

           These workers are still required to take at least 104 days off a year. The worker applied this system of exemption can leave the system at his or her will. The system will be in effect from April 2019.

    An important defect of this legislation is that the government failed to include the crucial item of “the expansion of the category of workers to be applied discretionary work hour system.” 

  Discretionary work hour system is the system by which the worker is regarded to have worked certain hours which was determined by the employer and the worker before hand, regardless of actual hours worked afterwards. For example, if the employer and the worker determined to work 10 hours before hand, and if the worker worked actually 8 hours, he will receive overtime pay of equivalent to 2 hours. This system has been planned by the government(MInistry of Labor)to use for such workers as professional workers like designers and those engaged in planning or research.

  The reason why the expansion of the coverage was not included in the legislation this time was the trouble in the process of Diet debate. While opposition parties have been strongly against the expansion on the ground that the expansion will increase long-time work. Debating against this argument, PM Abe argued at the Diet session that there exists the data which shows that workers of this category work actually shorter hours than the ordinary workers.

   The opposition party members asked the source of the data and asked Ministry of Labor which has conducted the work hour survey to explain it. It was found then that the questions asked for the two types workers were different. The question for ordinary workers was the overtime work of the day when they worked longest hours, and the question for the focused category of workers was the average hours worked for a day. Naturally, the data obtained from such different questions are not comparable so that PM Abe’s argument was accused to be non-sense.

   Having apologized for this lousy handling of the data at a meeting with opposition parties, Ministry of labor asked them to accept the rescheduling of submission of this item for a year. The opposition party representative fiercely against such a proposal, and consequently, this important item of expansion of category of workers was not included in this package of laws for legislation this time.

  Later from mid-July, Labor ministry announced to resume the whole process of examination of this item hoping to enact for the future.

  The process of workway reform legislation took more than three years, which is  extra-ordinarily long for legislation of this type of laws. Let me review briefly how it went in the process.

   As early as April 23, 2013, prime minister Shinzo Abe appealed at the joint meeting of advisory committee of Economy and Fiscal policies and the committee of Industrial Competitiveness, the highest body to determine Abenomics, to examine to formulate the new working hour system in which reward is determined not by the hours worked but by the outcome of the work. Prime minister’s proposal was followed soon by Minister of Welfare and Labor, Mr. Norihisa Tamura on May 28 that the government launch official examination for introducing “white collar exemption” in Japan’s work hour regulatory system.

   The debate on introduction of new work hour system had to cover many items, as I will review in the follows, and took a long time. And toward the final stage of long-lasting debate, in February 2018, the trouble on the nature of the data which was referred to by PM Abe as the evidence took place. This trouble wasted a few months and resulted in dropping an important item from the legislation.


Ⅲ.  Abenomics and Workway Reform

   It was emphasized by Abe administration and agreed by many experts that the workway reform is crucial as a structural reform to promote economic growth of Japan.

   Let me explain why. Japan’s workers productivity has been one of the lowest among major advanced economies of the world for the last few decades. For example, according to the survey of Japan Productivity Center for the period of 2010 to 2012, Japan’s labor productivity in service sector was only 38.4% of that of the US. While Japan’s labor productivity has been rising moderately during the recent decade, its pace has been much slower than that of US and Germany.

The main reason for this is the poor productivity of service sector. While the delay of IT application in this sector has been dragging the productivity improvement, the outdated work system particularly of hour linked pay system is another important reason.

   While average working hours of Japanese workers as a whole has been aroung 1700 hours a year, which is more or less comparable with major advanced economies of the world. But this is the average of temporary or non-regular workers who work short hours and regular workers. The regular workers working hours remain longer than 2000 hours a year. This reflects that Japanese workers, whose majority work in a broadly defined service sector, tend to work long hours with rather low productivity. And this related critically with the out-dated work hour regulation of Japan.

   In order to understand why the current work hour regulations are outdated, we need to look back Japan’s historical development of labor standard regulations.The current labor regulations have been formulated largely shortly after the defeat of the Pacific War in 1945. Under the control of the Supreme Commander of Allied Forces(SCAP), many aspects of government regulations have been overhauled and newly determined. Labor standard regulation was one of those.

   Prior to the defeat in the war, Japanese labor regulatory system was somewhat similar to the Western model, particularly, separate treatment of white-collar and blue collar workers. Since white collar workers were regarded as reservoir of the management class, they were not controlled by the labor law which regulated blue collar workers. In other words, they were “exempted” from labor regulations, just like Western counterparts.

   This separated treatment of white-collar and blue-collar has been regarded as class discrimination which is a critical element of Japan’s quasi-feudalistic social structure which was condemned by the SCAP office which earnestly advocated “democratization” of Japan. The young bureaucrats who were also critical against pre-war militaristic and quasi-feudalistic system of Japan and adoring “democracy” worked hard to plan the new labor regulation system without class discrimination.

   They drafted the new labor regulation system under the supervision of SCAP office without differentiation by worker’s status such as white and blue-collars.  The new labor standard law, which prescribes work hour regulations, thus created was rather unique compared to many major Western countries where white and blue collar workers are treated differently. The Japanese young bureaucrats believed that this uniform treatment of workers regardless of status was “democratic.”

    This new system motivated tremendously Japanese workers, particularly of those coming from low social classes. This is because they were on the same start line with those coming from higher social classes who were always treated differently and favorably. Now, only rule of the game was to work hard and win the competition. This “egalitarianism” was not limited in the labor system but extended also to many aspects of the society such as education and land ownership. Under this new system, if you work hard and attain results you can be promoted even to the top of social structure.

    Under the new “democratic” system, the majority of Japanese workers worked hard, which was a crucial element why Japanese economy has recovered quickly from the fatal destruction of the defeat of the war and grew rapidly as was often described as “Japan’s economic miracle.” Japan grew rapidly taking advantage of ample and cheap young highly motivated workers, imported technology and expanding global trade market of the time.

    However, as Japan grew much as a manufacturing exporting country, the economy has been transformed to the structure dominated increasingly by broadly defined service industries such as trading, finance, consulting, medicine, education, research, tourism, etc. Workers working in such industries are not working along the belt conveyers. Their contribution is measured not by the hours of work but rather the outcomes of their brain work.

   Now, the conventional labor regulatory system which measures worker’s achievement by the hours of work and pays accordingly, gradually became impediments to productivity growth. Since the contribution of these brain workers were not evaluated by their outcome or performance, they were discouraged rather than encouraged. Also because the system pays workers by hours, even these white-collar workers had to stay at the office and waste their time idly to meet the target of long working hours. This is one of the major the reasons why Japanese labor productivity, particularly of service sector, has lagged far behind of major economies in the world. This is the reason why I name the current labor regulatory system is “out dated.”

    Abe administration has been well aware of this institutional defect. Prime minister Abe proudly declared right after the outset of his administration at the end of 2012 that he will initiated a comprehensive package of economic policies, often called “Abenomics.”  Abenomics is comprised of three arrows: (1) unprecedented monetary easing to get rid of deflation, (2)active and dynamic fiscal policies to support the process of major economic transformation, and (2) structural reform to enhance economic power for growth.

   And reform of labor regulation is considered as the crucial element of growth strategy, as I explained earlier. White Abe administration did not have enough time to prepare for a full-fledged growth strategy in its first year, namely, the mid-2013, the administration forthrightly tackled the task of planning the growth strategy for mid-2014.  The administration tried to prepare the ground to write the deemed reform plan mobilizing reform task forces such as Industrial Competitive Committee, and Regulatory Reform Committee.

   They focused particularly on (1) monetary compensation  for unjustifiable dismissals, (2) Pay by performance among others. Proposals of these reform task forces have been encouraged by business leaders and particularly by prime minister Shinzo Abe himself, but encountered strongly by opposition parties, labor unions, and curiously by an important segment of the government, Ministry of Welfare and Labor.

   Let me review in some detail the contents and process of debate on various topics which have been relevant to realize “workway reform” of Abe administration, and finally give my personal appraisal on this subject. Topics which have been debated include(1) compenated dismissals, (2) temporary labor law reform, and (3) pay by outcomes、particularly the issue of expanding the coverage of workers who are applied the pay by outcomes.

 
Ⅳ.  Progress and Failures

1.  Compensated dismissals

    Compensated dismissal is the system by which the worker who was dismissed by unjustifiable reasons as recognized by the court can receive due compensation rather than returning to the old workshop. There are two ways of paying the compensation: paid after the court decision and paid prior to the court decision.

 
    Since Japanese legal system of dismissal is very rigid so that it is virtually almost impossible to dismiss workers, and also the dismissed workers are victimized for loss of forgone opportunity and income, the compensated dismissal system is useful for employers to make dismissal a reasonable option, and for dismissed workers who are otherwise not reasonably compensated this is helpful to reduce economic hardship.

    For these reasons, Abe administration tried to legalize the compensated dismissals as an important element of workway reform legislation. Abe administration proposed to legalize this as early as August 2014 to make Japanese legal system of dismissals somewhat comparable with major advanced nations.

  On June 16, 2015, the regulatory reform committee submitted the report in which the committee recommended to organize experts’ committee to examine for setting up rules of compensated dismissals.

   Half a year later, on January 31, 2017 the experts committee of Ministry of Walfare and Labor finally started examine the legalization. On this issue, the management side appreciates because the cost of dismissals can be more readily assessed, labor side worries because this system may help increase dismissals, and SME employers oppose because the cost of dismissals will increase because of the rule of minimum compensation.

   After repeated discussions, the experts’ committee concluded that the legalization of compensated dismissals is not necessary though the usefulness of the system itself can be admitted. About a year later, at the meeting of Industry Competitiveness Committee held on May 28, 2018, Ministry of Welfare and Labor declared  their decision to pass this up. Consequently, the legalization of compensated dismissals was not included in the growth strategy of Abenomics.

2.   Temporary labor law reform

     Abe administration has been attempting to reform the temporary labor law which was made much more rigid during the rein of Democratic Party of Japan government.  However, the attempt to reform the law has failed to be examined at the Diet session on June 20, 2014 because opposition parties attacked severely the mistake in the sentence of the bill for amendment submitted by the government.The government was obliged to resubmit it a year later.

     The revised bill for the reform of the law was picked up in the Diet discussion for examination in the main assembly of the House of Commons on May 12.2015.This was regarded as an important agendum side by side with labor standard law revision in the comprehensive reform of labor legislation. The government viewed the reform as necessary element of growth strategy. However, opposition parties as represented by Democratic Party of Japan opposed the reform as worsening of the rule of employment.
   On September 11, 2015, the bill for the reform of the law passed the examination at the main assembly of the House of Commons and consequently enacted.
   The main points of the reform are:
1.  The employer can extend the period of employing the dispatched worker, whih
      was limited up to 3years.
2.  For the dispatched worker to continue working under the same employer, he or
     she has to shift to other sections
3.  Worker dispatching companies need to be permitted by the government.
    This reform makes it possible for employers to keep employing dispatched workers as long as they want, which helps increase the flexible adjustment fo workforce.
 
  3.  Pay by outcomes

   Pay by outcome is the issue which has been debated harshly between those who oppose and support. In May 14, when PM Abe was expected to join the meeting to focus on this subject, the meeting was cancelled because of increasingly tense confrontation between Ministry of Labor and Industry Competitive Committee, and the meeting was postponed.

   On May 28, 2014 Industry Competitive Committee decided to relax the work hour regulation of 40 hours a week. Prime minister Shinzo Abe stated his determination to introduce “white collar exemption.” Expansion of the types of workers broadly, who are applied “Pay by Outcome,” will be conducive to enhance productivity.
However, there are those who want to limit the scope only within a very small numbers within Ministry of Welfare and Labor.

  On July 7, 2014, Employment policy Committee of Ministry of Labor started discussion of employment reform centering around the new pay by outcome system.
On Sept. 11, Employment Policy Committee presented main points for revision of work hour reform including “white collar exemption.” Management side demands the expansion of the scope of workers to be applied the new system, while the labor unions oppose worrying about likely increases of forced overwork.

  On Jan. 15, 2017, Ministry of Labor presented a new plan for pay by outcomes  at the sub-committee of Labor Policy Commission. The ministry proposes the annual income level of at least 10.75 million yen, and suggested 5 jobs as researchers as appropriate jobs.

    On Feb 13, 2017, Ministry of Welfare and Labor officially determined to introduce “white collar exemption’ at the Labor Policy Commission. The ministry meant to submit related bills to the ordinary session of the Diet and intends to put into effect by April 2016.  This system is expected to be applied to professional workers whose annual income is at least 10.75million a year.

   On April 2017, Ministry of Welfare and Labor announced to expand the types of workers who can be applied “discretionary hour work” to include sales workers who propose new plans. It is expected that financial and IT businesses will hire such workers, and they are expected to total more than several hundreds of thousands.


Ⅴ.  Workway Reform Execution Plan

1. Nine areas of workway reform
    On August 6. upon initiation of the third Abe cabinet, the discussion on the workway reform, which Abe administration regards as the most crucial challenge, will start.

    On September 15, Mr. Toshimitsu Motegi, LDP Chairperson of Policy Research
Committee, pointed to the five major items for workway reform.
   1. Improvement of work conditions for non-regular employees
   2. Shortening long working hours,
   3.  Preparing for flexible workways,
        eg: shifting from “spouse tax deduction” to “husband and wife tax deduction
   4. Promotion of obtaining desired kind of jobs
   5.  Accepting more foreign workers.

     On September 27, PM Abe stated at the first meeting of Workway Reform Realization Committee to examine nine items.

    On March 28, 2017, at the Realization Committede ,the government compiled the execution plan consisting of 9 items.
   1.  Improvement of non-regular employees,  introduction of same pay for same
        work
   2.   Raising wages: raise the minimum wage by 3% annually to reach 1000yen
   3.   Correcting long working hours, Upper limit for overtime with penalties, and
          introduction of interval system
   4.   Assisting changing  and reobtaining jobs, financial and information assistance
   5.    Flexible workways: Tele-work, dual job holding, and side-job.
   6.    Encouraging female and young workers, re-learning of middle aged workers
    7.   Promoting woking of aged workers: Extending retirement age and assistance
    8.   Child rearing, nursing of the aged,:  Improve conditions for care worker
    9.   Accepting more foreign workers, involving all  relevant ministries.

  2.  Non-hour linked pay system
 
      On July 8, 2017, Rengo(Federation of labor unions) decided to present requests for improvement to the government on the bill for labor standard law reform. Rengo means to ask improvements on items on health protection.

      On July 10, the government responded to revise “white collar exemption"prescription on the basis of request from Rengo including imposing 104 days off  a year for employers, setting upper limit of overtime, and labor management consultation on determining continuous work offs.

      On July 14, Chairperson Mr. Rikio Kohzu of Rengo met prime minister Shinzo
  Abe and requested for improvement of the reform plan. PM Abe promised to 
  accept Rengo’s request.
      On July 22, many member unions of Rengo strongly criticized Mr. Kohzu for
  him to have met prime minister Abe by showing collaborative attitude.
      On July 28, 2017, Rengo decided to withdraw their initial acceptance of
  the reform plan of Labor Standard Law. The leaders of Rengo judged that the
  opposition of member unions were so strong that the entire organization may
  have to risk the collapsing of the organization.
      Witnessing the Rengo’s decision not to affirm the reform plan of labor standard
  law made business side worry about the possible delay of legislation and the likely
  change of the content in favor of strengthening work hour regulations.


Ⅵ.  Appraisals

1.  Much differed outcome relative to the initial intent

      The final result of workway reform, particularly its legislative form, is much different from what Abe administration wanted to achieve. As discussed above,the main intent of Abe administration was to utilize the workway reform as an important device to promote Japan’s economic growth as an integral components of its “growth strategy.”
    Japan’s economic growth has been slowing down in recent decades particularly since 1990s. While there have been macro economic shock such as the collapse of the “bubble” which triggered the acute slowdown of the economy. However, Japanese economy has been suffering from long term structural impediments: one is the declining trend of population and the other is a low productivity of service industry. The latter is serious defect in the era of “service economy” of advanced nations.

    The strategic intent of workway reform has been focusing on this issue. In Japan as a service economy, in which 70to 80% of workers work in a broadly defined service sector, workers contribution to the industry is not necessarity a coefficient of hours worked like manufacturing sector but rather the outcome of creative work.
Recognizing this trend, Abe administration attempted to reform the work system in which workers can work more efficiently to utilize their talents rather than bound by work hours.

    With strong advice of business related members of Industry Competitiveness Committee of Abe administration, primie minister Shinzo Abe himself took initiative to reform the conventional regulations of workways. Main objectives have been basically two:
  (1) Introduce a new workway in which wages are paid on the basis of outcome rather than hours worked. This is often refered to as “white collar exemption” borrowing the expression of Western countries where the white collar workers who are regarded as reservoir of management are exempted from ordinary labor regulation imposed on blue collar workers.

  (2) Compensated dismissals.  This is an important breakthrough in the rigid legal regulations against dismissals in Japan. With introduction of this system, employers can have a greater leeway to dismiss workers and increase flexibility of employment, and workers can have some compensation to minimize the loss of income due to dismissals.
  This has been and still is strongly demanded by employers of foreign
companies investing in Japan because they need flexible organization of their workforce partly because their time-horizon is not long as the local Japanese companies.

   The result of the campaign of workway reform as seen in the final product of the
workway legislation achieved at the end of July 2018 reveals three major points.
(1)  Reform to “pay by outcome” or “white collar exemption” was only very partially admitted. The new labor standard law permits highly professional workers whose salary is more than 1075yen a year can be applied the system of pay by outcome. The number of eligible workers in current Japan may be around 10000.
This is much too much smaller than what Japanese economy needs and can supply to increase the efficiency of large service sector. In my view, the law should have permitted at least a few millions of workers in this category.

    In fact, prime minister Shinzo Abe attempted to introduce this system during his first administration in 2006 but failed by strong oppositions from opposition parties  labor unions and relevant government branch. The accomplishment this time may be congratulated in view of this experience. However, since the coverage of eligible workers is so small that the new system will have only negligible effect to contribute to economic growth, if any.

  (2)  Reform for dispatched worker law is effective in making more flexible use of temporary workers and hence contribute somewhat to increase the efficiency of business. The original law was invented to make use of new types of workers who wish to work but not necessarily full-time in 1985. However, under the DPJ administration in 2009, it was revised much not to allow prolonged employment of dispatched workers as a temporary status. The revision this time is useful both for employers and those workers who want to work temporarily. This amendment will have some modest effect on increasing industrial flexibility and efficiency.

  (3)  Reform for compensated dismissals has been rejected almost outright in the process of examination without much meaningful discussion by strong opposition of labor unions, small firm employers and opportunistic Ministry of Welfare and Labor.
  (4)  In contrast, a major move has been achieved in fortifying the regulation system of working hours. One is imposing rigorous upper limit on overtime.
Over time is allowed maximum 720 hours a year. Should be less than 100 hours
a month. Severe penalty is imposed if violated. And the other is same wage for same work, which means unjustifiable difference of working conditions between regular and non-regular employees should be abolished.

   Although protecting fair labor conditions and workers’ health is undoubtedly the most important pillar of labor regulation and labor policies, the fortified regulations on working hours and working conditions as described above will increase the burden on Japanese business corporations and possibly their effort to increase efficiency.

   We may compare the workway reform legislation of this time with the comprehensive reform covering both labor and welfare regulations and corporate taxes which were conducted in 2003 in Germany, often referred to as “Shoroeder Reform or Agenda 2010.” This reform has been regarded as having triggered the dramatic economic recovery of German economy in the period of Merkel administration.

   The workway reform legislation by Abe administration could be much better if eligible workers were much more widely permitted to work under pay by outcome and compensated dismissals were legally permitted, and at the same time workers basic working conditions are more severely supervised and protected as done in the legislation this time, both for the economy and for the workers.

2.  Problems of Ministry of Welfare and Labor

   In the process of examinations, discussions and debate for the campaign to legislate workway reform, I am puzzled by two conspicuous problems: one is the time spent to arrive at the conclusion and the other is the lousy handling of the date prepared for official debate by Ministry of Welfare and Labor.

   The process of this campaign has taken more than four years counting from the initial proposition of prime minister Shinzo Abe to alter the labor regulation system, particularly work hour regulations, in the early 2014 until the enactment of law at the end of June 2018.

    As the reader of this essay may well be aware as reading of my chronological depiction of the process that the meetings of relevant committees take a long time between them. Much of this time management is up to the government office in charge, namely, largely Ministry of Labor. I myself has had much experience in this kind of work, I am not sure why they wasted that much time to reach the conclusion.

   Another, and more serious issue is that Ministry of Welfare and Labor committed a serious mistake by giving prime minister “wrong data” which led prime minister Shinzo Abe lose his credential in debate, and consequently the most important item to be included in the final legislation was scrapped.

    The reason why the expansion of the coverage was not included in the legislation this time was the trouble in the process of Diet debate. While opposition parties have strongly opposed against the expansion of the eligibility of the workers on the ground that the expansion will increase long-time work. Debating against this argument, PM Abe argued at the Diet session that there exists the data which shows that workers of potential eligibility work actually shorter hours than the ordinary workers.  The opposition party members asked the source of the data.  Ministry of Labor which has conducted the work hour survey found then that the questions asked for the two types workers were different so that working hours were not comparable, and consequently PM Abe’s argument was accused to be non-sense.

   This is a serious issue in the sense that Ministry of Labor not only abused but even demised the supreme leader of the government. This is the most primitive mistake that even college students would not commit to write a report. The ministry later reported that they found 117 cases of mistakes. The fact that this kind of lousy work is done in this most critical phase of the debate would make us even skeptical of some kind mal-intent at the side of the government branch in charge.  It is curious why reasonable punishment has not been given to the ministry on this serious mis-conduct.

   The strategic intent of Abe administration is clear, namely, make Japanese economy efficient, particularly, labor market. The actions that the ministry has taken in the process seem not quite supporting or even following it. We know that Ministry of Welfare and Labor must secure the understanding and support from both management and labor sides, unlike many ministries which only need to satisfy their clients. Nevertheless, the attitude of Ministry of Welfare and Labor seems curious and questionable under the given strategic intent of Abe administration.

   The opposition party members asked the source of the data and asked Ministry of Labor which has conducted the work hour survey to explain it. It was found then that the questions asked for the two types workers were different. The question for ordinary workers was the overtime work of the day when they worked longest hours, and the question for the focused category of wokers was the average hours worked for a day. Naturally, the data obtained from such different questions are not comparable so that PM Abe’s argument was accused to be non-sense.

   2.   Too much time elapsing and Lousy job of Ministry of Welfare and Labor
       ーintentional disturbance?

   3.  Productivity and Worker Protection
      ーLimited progress for flexibility
      ーIncreased control and inspection of working conditions
      ーProductivity increase by legal reform questioned
      ーLittle or no contribution for economic growth
  ーProductivity increase is up to corporate and individual effort
 
 

«The Third Abe Administration and its Tasks

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