Facing two decades of deflation and a declining and aging population, Prime Minister Shinzo Abe’s government has implemented “Abenomics”, comprised of three arrows: aggressive monetary policy, expansionary fiscal policy and an economic growth strategy. The first and second arrows are matters of political will and already implemented. The third (economic growth) arrow should eventually come from business activities. Trade liberalization, including TPP and structural reforms are necessary, but these may not be sufficient. The efforts of and performance by companies and employees to strengthen their competitiveness through innovation and entrepreneurship are crucially important. In the long run, education is crucial; but in the short run, psychological reforms may be warranted. Through the long deflationary period, Japanese people may have tended to be short sighted, inward-looking and conservative. We may need psychological reforms to promote long sightedness, an external focus and more risk taking. TPP and more global competition can be a new “healthy” gaiatsu, or foreign pressure, for Japan to carry out structural and (possibly) psychological reforms.
Sponsor: Centre for Japanese Research
By: Atsushi Yamakoshi
Type: Discussion
