Growth Strategies - EU-Japan · €keizai/3syo‐matome.pdf. ... • II stead,nstead, it needs to take bobo dld reeo sforms so

Growth StrategiesGrowth StrategiesGrowth Strategies Growth Strategies ddandand

Fi l C lid tiFi l C lid tiFiscal Consolidation Fiscal Consolidation inin JapanJapan

Fiscal Sustainability and Growth in Japan and the EUFiscal Sustainability and Growth in Japan and the EUEU-Japan Open Forum

Friday, 30th November, 2012Sahoko KAJI, Ph.D.

Professor of economics/PCP Co ordinatorProfessor of economics/PCP Co-ordinatorKeio University

ContentsContents

J p n’ fi l itu ti nJapan’s fiscal situation

Japan’s economic situationJapan s economic situation

Japan’s growth strategyJapan s growth strategy

2

J ’Japan’s fiscal

situationsituation

3

4

General Government Financial Balanceshttp://www.mof.go.jp/english/budget/budget/fy2012/e20111224b.pdf

5

General Government Gross Debthttp://www.mof.go.jp/english/budget/budget/fy2012/e20111224b.pdf

6Government Bond Issues and Bond Dependency Ratiohttp://www.mof.go.jp/english/budget/budget/fy2012/e20111224b.pdf

7http://www.imf.org/external/pubs/ft/scr/2012/cr12208.pdf

8http://www.mof.go.jp/english/budget/budget/fy2012/e20111224b.pdf

9http://www5.cao.go.jp/keizai3/2012/0727wp‐keizai/3syo‐musubi.pdf

Japan’s total population and age structure

Over 65

15‐64Under 15

10http://www.gov‐online.go.jp/topics/sz/images/img_07l.jpg

Comprehensive reform Comprehensive reform of tax and social securityof tax and social security

• The bill passed the diet on 10th August 2012, supported by DP LDP and Komeisupported by DP, LDP and Komei

• The LDP unanimously voted for this bill• Consumption tax 5% → 8% in April 2014,

10% in October 201510% in October 2015• At this point the PM announced a

di l ti f th di t “i th f t ”dissolution of the diet “in the near future”• Diet was dissolved on 16th November

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Japan’s Current Account and lending by foreign banks

C t A tCurrent Account GDP ratio

Lending by foreign banks (right scale)

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Japan’s Saving‐Investment Balance

HouseholdCorporationsCorporations

E lExternal

General govn’tGeneral govn t

18http://www5.cao.go.jp/keizai3/2011/1221nk/n11_3/n11_3_2.html

J ’Japan’s economic situationsituation

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20http://www5.cao.go.jp/keizai1/2012/0124mitoshi‐e.pdf#page=1






Japan’s Unemployment RateJapan’s Unemployment Rate

26http://www.stat.go.jp/data/roudou/longtime/03roudou.htm

27

http://www5.cao.go.jp/keizai3/2011/0722wp‐keizai/3syo‐matome.pdf

J ’Japan’s growth gstrategystrategy

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30http://research.stlouisfed.org/publications/review/12/07/243‐264El‐Erian.pdf

31http://www5.cao.go.jp/keizai3/2011/0722wp‐keizai/2syo.pdf



34http://www5.cao.go.jp/keizai3/2011/0722wp‐keizai/3syo‐matome.pdf





Growth StrategiesGrowth Strategies

•• The euro took away the easy choices The euro took away the easy choices of monetary and fiscal of monetary and fiscal expansionexpansion

•• Along with the Lisbon strategy theAlong with the Lisbon strategy the•• Along with the Lisbon strategy, the Along with the Lisbon strategy, the euro was expected to encourage euro was expected to encourage structural reforms and to increase structural reforms and to increase competitiveness and productivity incompetitiveness and productivity incompetitiveness and productivity in competitiveness and productivity in all Member Statesall Member States

•• But this did not happenBut this did not happen

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•• Since the euro crisis, Member States Since the euro crisis, Member States hit b th i i d tihit b th i i d tihit by the crisis are conducting hit by the crisis are conducting structural reforms that are structural reforms that are unprecedented in terms of both speed unprecedented in terms of both speed and rangeand rangeand rangeand range

•• Had these reforms taken place earlier, Had these reforms taken place earlier, t i th ldt i th ldasymmetry in the euro area would asymmetry in the euro area would

have gone down and the crisis could have gone down and the crisis could gghave been avoidedhave been avoided

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•• The Japanese might think Europe is The Japanese might think Europe is i i di b ll Ji i di b ll Jexperiencing disaster, but actually Japan experiencing disaster, but actually Japan

is in a worse positionis in a worse positionpp•• At least in Europe, there are structural At least in Europe, there are structural reforms conditionality sense of crisisreforms conditionality sense of crisisreforms, conditionality, sense of crisis, reforms, conditionality, sense of crisis, none of which exists in Japannone of which exists in Japan

•• The Japanese still think they have the The Japanese still think they have the choice to count on monetary and fiscalchoice to count on monetary and fiscalchoice to count on monetary and fiscal choice to count on monetary and fiscal expansion, to avoid painful reformsexpansion, to avoid painful reforms

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So the Europeans are actually much better So the Europeans are actually much better off than the Japanese at least they areoff than the Japanese at least they areoff than the Japanese, at least they are off than the Japanese, at least they are moving forward with moving forward with •• Six Pack (including the MacroeconomicSix Pack (including the Macroeconomic•• Six Pack (including the Macroeconomic Six Pack (including the Macroeconomic Imbalance Procedure)Imbalance Procedure)

•• TSCG (including the fiscal compact)TSCG (including the fiscal compact)•• TSCG (including the fiscal compact)TSCG (including the fiscal compact)•• EuroplusEuroplus PactPact•• Two PackTwo Pack•• European Banking UnionEuropean Banking Unionp gp g•• Euro Area Common Budget …Euro Area Common Budget …

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•• Japan should not rely on monetary and Japan should not rely on monetary and fi l li ifi l li ifiscal policiesfiscal policies

•• Instead, it needs to take bold reforms so Instead, it needs to take bold reforms so I stead, it eeds to take bo d e o s soI stead, it eeds to take bo d e o s sothat potential demand becomes that potential demand becomes effective demandeffective demandeffective demandeffective demand

•• If not, supply>demand means deflationIf not, supply>demand means deflationpp ypp y•• Governance overhaul is needed in Governance overhaul is needed in Japan too so that support for structuralJapan too so that support for structuralJapan too, so that support for structural Japan too, so that support for structural reform will be reflected in policyreform will be reflected in policy

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Growth Strategies - EU-Japan · €keizai/3syo‐matome.pdf. ... • II stead,nstead, it needs to take bobo dld reeo sforms so