In June, the government announced a New Growth Strategy to realize a strong economy, robust public finances and strong social security system. The Japan Journal’s Osamu Sawaji asked Minister of State for National Policy Satoshi Arai about some of the key aspects of the new policy.
What is the background to the development of the New Growth Strategy?
Minister Satoshi Arai: As a result of Japan’s economic stagnation during the past twenty years, Japanese society has lost its former vitality and many people have a sense of unease about the future. One of the factors to which the weakening of the Japanese economy can be attributed is the deflation phenomenon. Deflation led to a drop in tax revenues, weakening the fiscal structure, which in turn weakened the social security structure. The government devised the New Growth Strategy with the aim of accomplishing robust public finances and strong social security by bringing this deflation phenomenon under control, and achieving an average annual growth rate of 3% by 2020.
The coexistence of economic growth and fiscal sustainability was one of the key themes of debate at the G8/G20 held in Canada in late June. The New Growth Strategy explained by Prime Minister Naoto Kan, formulated ahead of the rest of the world, was extremely well-received by each country. One of the distinctive features of the New Growth Strategy is its two-phase structure. Phase I, which views “overcoming deflation” as the biggest goal, places emphasis on creating a process conducive to full-scale growth by generating demand and employment. Phase II aims to achieve growth of more than the average nominal 3% by the year 2020, by pushing forward with initiatives for economic growth and fiscal sustainability
What are the focal policies of the New Growth Strategy?
One is “Green Innovation.” This means to promote technological innovations and disseminate technology in the fields of the environment and energy, in which Japan boasts high technological capabilities. If by doing this we introduce Japan’s environmental and energy technologies to the world, we can also help reduce global carbon dioxide emissions. For example, some estimates say that if we utilize Japan’s technological capability in the thermal power plants of the United States, China and India, we can achieve a reduction of approximately 1.3 billion tons (equivalent to Japan’s annual carbon dioxide emissions).
Another is “Life Innovation.” This is the development of growth industries in the field of medical care and nursing care based on Japan’s high level of technology and services. This nursing care and medical care field uncovers latent demand, as well as being highly effective in creating employment, so it is fair to say that it will also lead to the dissolution of deflation.
If domestic demand expands in Japan, imports from a variety of countries will also increase. With economic recovery in Europe and the United States still not complete, Japan’s growth will lead to the stabilizing of the world economy.
What kind of policies within the New Growth Strategy are you working out in respect of Asia?
From the 1950s to the high-growth period of the 1960s Japan concentrated on improving its infrastructure, such as roads, bridges, harbors, dams, and water supply and sewerage, and this became the driving force behind economic growth. Now, demand for such infrastructure is also very high in Asia, which is experiencing the most rapid economic growth in the world. Japan wishes to use the technology for infrastructure improvement that it has cultivated to date in Asia, to help industrial development or contribute to stabilizing the lives of communities there. Specific examples include the bullet train, a precise and safe high-speed railway that so far has never had an accident involving loss of life, highly safe atomic power plants that utilize Japan’s superior technology, the thermal plants that I mentioned earlier which have low carbon dioxide emissions, and water supply systems with low leakage levels.
We would like to cooperate with other countries by tailoring Japan’s infrastructure technologies such as these to the distinctive features of individual countries, and offer these in a single package, from planning to operation.
Further, facilitating the flow of people, goods and funds will enable Asia to grow even bigger by creating a single economic bloc. In order to achieve this, we will implement the “Comprehensive Strategy for Economic Partnership,” which aims to remove all barriers to economic activity and create a seamless market.
In particular, taking advantage of its role as the host economy of the 2010 Asia-Pacific Economic Cooperation (APEC) meetings to be held in November this year in Yokohama, Japan will exert strong leadership in questing for an ideal way toward establishing the Free Trade Area of the Asia-Pacific (FTAAP), which is to cover a large part of the Asia-Pacific region.
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