Economic Policies
#32Key Findings
With a number of ongoing structural difficulties, Japan scores relatively poorly with regard to economic policy (rank 32). Its score on this measure has declined by 0.2 points relative to 2014.
The pandemic struck as growth was waning. However, after a very sharp decline in GDP in 2020, modest growth returned in 2021. Structural constraints and labor market rigidities continue to cast a shadow on future growth. Consumption and domestic investment rates remain sluggish.
The pandemic’s labor market effects were relatively mild, with the unemployment rate returning to 2.9% in late 2021. Non-regular employment is a concern for young people and for women, with half of working women holding such jobs in 2021. The country faces a growing labor shortage due to population aging and decline.
The government has run deficits for years, dropping to a negative fiscal balance of 10.3% of GDP in 2020. A goal of reaching budgetary balance by 2025 now appears unlikely by 2027, even under a high-growth scenario. Debt levels are very high. While still strong, the country’s R&D capacities have been declining over past decades.
The pandemic struck as growth was waning. However, after a very sharp decline in GDP in 2020, modest growth returned in 2021. Structural constraints and labor market rigidities continue to cast a shadow on future growth. Consumption and domestic investment rates remain sluggish.
The pandemic’s labor market effects were relatively mild, with the unemployment rate returning to 2.9% in late 2021. Non-regular employment is a concern for young people and for women, with half of working women holding such jobs in 2021. The country faces a growing labor shortage due to population aging and decline.
The government has run deficits for years, dropping to a negative fiscal balance of 10.3% of GDP in 2020. A goal of reaching budgetary balance by 2025 now appears unlikely by 2027, even under a high-growth scenario. Debt levels are very high. While still strong, the country’s R&D capacities have been declining over past decades.
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How successful has economic policy been in providing a reliable economic framework and in fostering international competitiveness?
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Economic policy fully succeeds in providing a coherent set-up of different institutional spheres and regimes, thus stabilizing the economic environment. It largely contributes to the objectives of fostering a country’s competitive capabilities and attractiveness as an economic location.
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Economic policy largely provides a reliable economic environment and supports the objectives of fostering a country’s competitive capabilities and attractiveness as an economic location.
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3
Economic policy somewhat contributes to providing a reliable economic environment and helps to a certain degree in fostering a country’s competitive capabilities and attractiveness as an economic location.
2
1
1
Economic policy mainly acts in discretionary ways essentially destabilizing the economic environment. There is little coordination in the set-up of economic policy institutions. Economic policy generally fails in fostering a country’s competitive capabilities and attractiveness as an economic location.
Recent macroeconomic developments have been mixed. Japan has experienced an extremely long business-cycle upswing, lasting since late 2012. But growth rates have remained relatively modest, while structural constraints such as demographic conditions and labor market rigidities continue to cast a shadow on future growth prospects. According to the IMF, the real growth rate in 2019 was only 0.5%. The COVID-19 pandemic, which hit Japan in January 2020, has made the situation worse. The real growth rate in 2020 fell to -4.6%, a contraction of 29% on an annualized basis. However, there are some signs of pandemic recovery in late 2021, with the IMF projecting 2.4% economic growth in 2021 and 3.2% in 2022.
The policy goals of a 2% annual inflation rate and concomitant increases in inflation expectations remain elusive. In mid-2019, the Bank of Japan trimmed its 2020 inflation target and hinted that it would not hesitate to take additional easing measures if the economic situation worsened. After conducting an assessment of the economic activities in March 2021, the bank introduced new policy framework that would strengthen quantitative and qualitative monetary easing that it had led previously. This signals that existing measures remain insufficient, particularly as the global economy continues to remain shaky due to the COVID-19 pandemic. The pandemic has depressed all inflationary potential. The inflation rate in 2020 stood at 0%, down from 0.5% in 2019, and in 2021, it fell further to -0.2%. In November 2021, the new LDP government led by Prime Minister Kishida announced a ¥56tn/$490bn stimulus package to support families and businesses affected by the pandemic. While this reflationary monetary policy promises some immediate and longer-term investments, it will contribute to increased national debt.
Despite consistent government and central-bank activity, and despite the presence of significant corporate cash holdings deriving from retained profits, consumption and domestic investment rates remain sluggish. Compensating for the negative effects of an aging and shrinking workforce has proven to be extremely challenging. The initiation of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the free-trade agreement with the EU in 2019 may be interpreted as positive signals. The much hoped-for economic boost from the 2020 Tokyo Olympic Games was undermined by the COVID-19 pandemic, which resulted in a one-year postponement and the eventual banning of audiences and spectators. While the actual impact of the 2021 Tokyo Olympic Games is difficult to calculate, many argue that its cost was likely greater than its benefits.
Citations:
Noriyuki Suzuki, Japan’s longest growth run in 16 years may not guarantee future prosperity, Japan Times, 15 November 2017, https://www.japantimes.co.jp/news/2017/11/15/business/economy-business/japans-longest-growth-run-16-years-may-not-guarantee-future-prosperity/
IMF: World Economic Outlook, October 2021
Japan to spend record ¥55.7 trillion for economic stimulus, Japan Times, November 18, 2021, https://www.japantimes.co.jp/news/2021/11/18/business/japan-stimulus-spending/
Price Stability Target of 2 Percent, Bank of Japan, 2021, https://www.boj.or.jp/en/mopo/outline/qqe.htm/
Tokyo official: No way we can assess economic impact of Games, The Asahi Shimbun, September 21, 2021, https://www.asahi.com/ajw/articles/14444808
The policy goals of a 2% annual inflation rate and concomitant increases in inflation expectations remain elusive. In mid-2019, the Bank of Japan trimmed its 2020 inflation target and hinted that it would not hesitate to take additional easing measures if the economic situation worsened. After conducting an assessment of the economic activities in March 2021, the bank introduced new policy framework that would strengthen quantitative and qualitative monetary easing that it had led previously. This signals that existing measures remain insufficient, particularly as the global economy continues to remain shaky due to the COVID-19 pandemic. The pandemic has depressed all inflationary potential. The inflation rate in 2020 stood at 0%, down from 0.5% in 2019, and in 2021, it fell further to -0.2%. In November 2021, the new LDP government led by Prime Minister Kishida announced a ¥56tn/$490bn stimulus package to support families and businesses affected by the pandemic. While this reflationary monetary policy promises some immediate and longer-term investments, it will contribute to increased national debt.
Despite consistent government and central-bank activity, and despite the presence of significant corporate cash holdings deriving from retained profits, consumption and domestic investment rates remain sluggish. Compensating for the negative effects of an aging and shrinking workforce has proven to be extremely challenging. The initiation of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the free-trade agreement with the EU in 2019 may be interpreted as positive signals. The much hoped-for economic boost from the 2020 Tokyo Olympic Games was undermined by the COVID-19 pandemic, which resulted in a one-year postponement and the eventual banning of audiences and spectators. While the actual impact of the 2021 Tokyo Olympic Games is difficult to calculate, many argue that its cost was likely greater than its benefits.
Citations:
Noriyuki Suzuki, Japan’s longest growth run in 16 years may not guarantee future prosperity, Japan Times, 15 November 2017, https://www.japantimes.co.jp/news/2017/11/15/business/economy-business/japans-longest-growth-run-16-years-may-not-guarantee-future-prosperity/
IMF: World Economic Outlook, October 2021
Japan to spend record ¥55.7 trillion for economic stimulus, Japan Times, November 18, 2021, https://www.japantimes.co.jp/news/2021/11/18/business/japan-stimulus-spending/
Price Stability Target of 2 Percent, Bank of Japan, 2021, https://www.boj.or.jp/en/mopo/outline/qqe.htm/
Tokyo official: No way we can assess economic impact of Games, The Asahi Shimbun, September 21, 2021, https://www.asahi.com/ajw/articles/14444808
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How effectively does labor market policy address unemployment?
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Successful strategies ensure unemployment is not a serious threat.
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Labor market policies have been more or less successful.
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Strategies against unemployment have shown little or no significant success.
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Labor market policies have been unsuccessful and rather effected a rise in unemployment.
Despite the devastating impacts of the pandemic on the Japanese economy in 2020, its effects on employment were relatively mild. The total unemployment rate stood at 2.9% in October 2021 (although this figure would likely be somewhat higher if measured in the same manner as in other advanced economies).
Like many other countries, the Japanese labor market has witnessed a significant deterioration in the quality of jobs. Retiring well-paid baby boomers are often been replaced by part-timers, contractors and other lower-wage workers. The incidence of non-regular employment has risen substantially to about 40%. Many young people have difficulty finding permanent employment and are not covered by employment insurance. Moreover, because of the non-permanent nature of such jobs, they lack appropriate training to advance to higher-quality jobs. Most economists argue that the conditions for paying and dismissing regular employees have to be liberalized to reduce the gap between the two types of employment. The incidence of non-regular employment is not just a concern for young people but also for women. According to the Japan Statistical Agency, whereas the total non-regular employment rate in 2021 was 37.1%, the rate among men was 22.1% and among women was 54.4%. A recent study of job separation and re-employment due to COVID-19 by the Japan Institute of Labor (JIL) found that while 93% of workers continued to work at the same company, the job separation rate was higher among women, younger workers and non-regular workers than it was among male and older workers as well as permanent employees.
Adding to the deterioration in the quality of jobs, Japan has been facing a growing labor shortage in both skilled and semi-/unskilled sectors as a result of population aging and decline, a situation that has worsened as a result of the COVID-19 pandemic. Although there are some signs of a shift toward a more open immigration regime, a reform of immigration policies to attract foreign workers will be inevitable.
Unemployment insurance payments are available only for short periods. In combination with the associated social stigma, this has kept unemployment rates low. The government raised the mandatory minimum-wage to ¥930/hr ($8.15/hr) in March 2021. The minimum wage is low enough that it has not seriously affected employment opportunities, although some evidence shows it may be beginning to affect employment rates among low-paid groups such as middle-aged low-skilled female workers.
The Labor Standards Law was changed in 2018. Among its provisions, the allowed quantity of overtime work, a serious problem in Japan, was limited to 100 hours per month, while the work-hour limitations and overtime payments for highly paid professionals have been removed. The law also addresses the wage gap between regular and non-regular work (“equal pay for equal work”). However, a number of structural issues have not yet been fully addressed. In December 2018, the OECD published a report in which it recommended further improvements in job quality and reforms to the mandatory retirement age.
The government has sought to increase the role played by women in the economy while additionally boosting the national birth rate. These two goals have proved difficult to achieve in parallel.
Citations:
Takahashi, K., Job Separation and Reemployment amid the COVID-19 Crisis in Japan, https://www.jil.go.jp/english/jli/documents/2021/031-01.pdf
OECD: Working Better with Age: Japan, 20 December 2018
Japan Statistical Agency: Unemployment, https://www.stat.go.jp/english/data/roudou/results/month/index.html
Long closed to most immigration, Japan looks to open up amid labor shortage, Washington Times, November 18, 2021, https://www.washingtonpost.com/world/2021/11/18/japan-labor-shortage-immigration/
Like many other countries, the Japanese labor market has witnessed a significant deterioration in the quality of jobs. Retiring well-paid baby boomers are often been replaced by part-timers, contractors and other lower-wage workers. The incidence of non-regular employment has risen substantially to about 40%. Many young people have difficulty finding permanent employment and are not covered by employment insurance. Moreover, because of the non-permanent nature of such jobs, they lack appropriate training to advance to higher-quality jobs. Most economists argue that the conditions for paying and dismissing regular employees have to be liberalized to reduce the gap between the two types of employment. The incidence of non-regular employment is not just a concern for young people but also for women. According to the Japan Statistical Agency, whereas the total non-regular employment rate in 2021 was 37.1%, the rate among men was 22.1% and among women was 54.4%. A recent study of job separation and re-employment due to COVID-19 by the Japan Institute of Labor (JIL) found that while 93% of workers continued to work at the same company, the job separation rate was higher among women, younger workers and non-regular workers than it was among male and older workers as well as permanent employees.
Adding to the deterioration in the quality of jobs, Japan has been facing a growing labor shortage in both skilled and semi-/unskilled sectors as a result of population aging and decline, a situation that has worsened as a result of the COVID-19 pandemic. Although there are some signs of a shift toward a more open immigration regime, a reform of immigration policies to attract foreign workers will be inevitable.
Unemployment insurance payments are available only for short periods. In combination with the associated social stigma, this has kept unemployment rates low. The government raised the mandatory minimum-wage to ¥930/hr ($8.15/hr) in March 2021. The minimum wage is low enough that it has not seriously affected employment opportunities, although some evidence shows it may be beginning to affect employment rates among low-paid groups such as middle-aged low-skilled female workers.
The Labor Standards Law was changed in 2018. Among its provisions, the allowed quantity of overtime work, a serious problem in Japan, was limited to 100 hours per month, while the work-hour limitations and overtime payments for highly paid professionals have been removed. The law also addresses the wage gap between regular and non-regular work (“equal pay for equal work”). However, a number of structural issues have not yet been fully addressed. In December 2018, the OECD published a report in which it recommended further improvements in job quality and reforms to the mandatory retirement age.
The government has sought to increase the role played by women in the economy while additionally boosting the national birth rate. These two goals have proved difficult to achieve in parallel.
Citations:
Takahashi, K., Job Separation and Reemployment amid the COVID-19 Crisis in Japan, https://www.jil.go.jp/english/jli/documents/2021/031-01.pdf
OECD: Working Better with Age: Japan, 20 December 2018
Japan Statistical Agency: Unemployment, https://www.stat.go.jp/english/data/roudou/results/month/index.html
Long closed to most immigration, Japan looks to open up amid labor shortage, Washington Times, November 18, 2021, https://www.washingtonpost.com/world/2021/11/18/japan-labor-shortage-immigration/
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How effective is a country’s tax policy in realizing goals of revenue generation, equity, growth promotion and ecological sustainability?
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Taxation policy fully achieves the objectives.
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Taxation policy largely achieves the objectives.
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Taxation policy partially achieves the objectives.
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Taxation policy does not achieve the objectives at all.
Generally speaking, Japan has a reasonably fair tax system that has helped the government to finance expenditures and allowed the corporate sector to thrive. Following the international trend, the Japanese government began cutting its corporate-tax rate (calculated as the statutory national rate plus the local rate) in 2012. This led to a combined corporate-tax rate decline from 39.5% in 2011 to 29.7% in 2021. The fact that authorities followed up on their initial promise to lower corporate-tax rates despite the country’s tight fiscal situation provides a positive signal. However, only around 30% of Japanese firms actually pay corporate tax, with the remainder exempted due to poor performance.
Increasing the comparatively low consumption-tax rate is an important factor in easing budgetary stress, particularly given the huge public debt and the challenges presented by an aging population. The government raised the consumption-tax rate from 5% to 8% in 2014, increasing it further to 10% in 2019. While this displayed the government’s willingness to tackle difficult issues, the rate change has not significantly improved the country’s fiscal situation.
The OECD has recommended that the country’s energy-related taxes be increased both for environmental and fiscal reasons. Apart from a fairly low “global warming tax,” imposed since late 2012 on the consumption of fossil fuels such as petroleum, natural gas and coal, fostering environmental sustainability does not figure as a prominent consideration in Japan’s tax system.
Japan’s tax system achieves a reasonable amount of redistribution. However, salaried employees benefit from far fewer tax deductions than do self-employed professionals, farmers and small businessmen.
Citations:
Takeshi Kawakatsu, Soocheol Lee and Sven Rudolph, The Japanese Carbon Tax and the Challenges to Low-Carbon Policy Cooperation in East Asia, Discussion Paper No. E-17-009, Graduate School of Economics, Kyoto University, December 2017, http://www.econ.kyoto-u.ac.jp/dp/papers/e-17-009.pdf
OECD, Japan: Promoting Inclusive Growth for an Ageing Society, Better Policies Series, Paris, April 2018
United Nations, Committee of Experts on International Cooperation in Tax Matters, Eighteenth session
New York, 23-26 April 2019, https://www.un.org/esa/ffd/wp-content/uploads/2019/04/18STM_CRP4-Environmental-tax-issues.pdf
Robin Harding, Japan data point to bigger than expected hit from sales tax rise, Financial Times, 8 October 2019, https://www.ft.com/content/90f19130-e8e2-11e9-a240-3b065ef5fc55
Increasing the comparatively low consumption-tax rate is an important factor in easing budgetary stress, particularly given the huge public debt and the challenges presented by an aging population. The government raised the consumption-tax rate from 5% to 8% in 2014, increasing it further to 10% in 2019. While this displayed the government’s willingness to tackle difficult issues, the rate change has not significantly improved the country’s fiscal situation.
The OECD has recommended that the country’s energy-related taxes be increased both for environmental and fiscal reasons. Apart from a fairly low “global warming tax,” imposed since late 2012 on the consumption of fossil fuels such as petroleum, natural gas and coal, fostering environmental sustainability does not figure as a prominent consideration in Japan’s tax system.
Japan’s tax system achieves a reasonable amount of redistribution. However, salaried employees benefit from far fewer tax deductions than do self-employed professionals, farmers and small businessmen.
Citations:
Takeshi Kawakatsu, Soocheol Lee and Sven Rudolph, The Japanese Carbon Tax and the Challenges to Low-Carbon Policy Cooperation in East Asia, Discussion Paper No. E-17-009, Graduate School of Economics, Kyoto University, December 2017, http://www.econ.kyoto-u.ac.jp/dp/papers/e-17-009.pdf
OECD, Japan: Promoting Inclusive Growth for an Ageing Society, Better Policies Series, Paris, April 2018
United Nations, Committee of Experts on International Cooperation in Tax Matters, Eighteenth session
New York, 23-26 April 2019, https://www.un.org/esa/ffd/wp-content/uploads/2019/04/18STM_CRP4-Environmental-tax-issues.pdf
Robin Harding, Japan data point to bigger than expected hit from sales tax rise, Financial Times, 8 October 2019, https://www.ft.com/content/90f19130-e8e2-11e9-a240-3b065ef5fc55
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To what extent does budgetary policy realize the goal of fiscal sustainability?
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Budgetary policy is fiscally sustainable.
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Budgetary policy achieves most standards of fiscal sustainability.
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Budgetary policy achieves some standards of fiscal sustainability.
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Budgetary policy is fiscally unsustainable.
Gross public indebtedness in Japan amounted to nearly 260% of GDP in 2021, the highest level among advanced economies. Though the primary balance has shown a declining tendency since 2009, it dropped sharply from -3.3% in 2018 to -10.3% in 2020, largely as a result of the COVID-19 pandemic. In 2018, the government shifted back its goal of achieving a balanced primary budget to 2025. However, in November 2021, the government announced that it was unlikely to achieve this until 2027, even under a high economic growth scenario.
Nominal interest rates remain low, partly due to the fact that more than 90% of public debt is held by Japanese, mainly institutional investors. The government and
institutional investors appear to have little interest in lower bond prices, which can help sustain the current price level of Japanese government bonds for the time being. However, should national savings fall short of domestic needs – a foreseeable development given the aging Japanese population – government deficits may be difficult to absorb domestically. In this case, government bond prices could fall and interest rates could rise quickly, which could then create serious problems for the Japanese government budget and the country’s financial sector.
In addition to such structural longer-term concerns, the unprecedented and continuing presence of the central bank in the financial market could lead to short- term liquidity shortages with regard to the availability of Japanese government bonds (JGBs). This could lead to considerable short-term swings in JGB prices and may ultimately trigger significant concerns regarding the stability of the financial system.
Given the record levels of public indebtedness in global comparison, Japan’s fiscal sustainability looks fragile.
Citations:
Japanese Public Finance Fact Sheet, April 2021, Japan Ministry of Finance, https://www.mof.go.jp/english/policy/budget/budget/fy2021/02.pdf
Scope Ratings AG, Japan Rating Report, March 2018
Takashi Oshio, Managing Japan’s debt and the financial risks, East Asia Forum, 5 August 2018, http://www.eastasiaforum.org/2018/08/05/managing-japans-debt-and-the-financial-risks/
Keiichiro Kobayashi, The Tenuous Myth of Japan’s Fiscal Infallibility, The Tokyo Foundation for Policy Research, 15 November 2018, http://www.tokyofoundation.org/en/articles/2018/tenuous-myth-of-fiscal-infallibility
Nominal interest rates remain low, partly due to the fact that more than 90% of public debt is held by Japanese, mainly institutional investors. The government and
institutional investors appear to have little interest in lower bond prices, which can help sustain the current price level of Japanese government bonds for the time being. However, should national savings fall short of domestic needs – a foreseeable development given the aging Japanese population – government deficits may be difficult to absorb domestically. In this case, government bond prices could fall and interest rates could rise quickly, which could then create serious problems for the Japanese government budget and the country’s financial sector.
In addition to such structural longer-term concerns, the unprecedented and continuing presence of the central bank in the financial market could lead to short- term liquidity shortages with regard to the availability of Japanese government bonds (JGBs). This could lead to considerable short-term swings in JGB prices and may ultimately trigger significant concerns regarding the stability of the financial system.
Given the record levels of public indebtedness in global comparison, Japan’s fiscal sustainability looks fragile.
Citations:
Japanese Public Finance Fact Sheet, April 2021, Japan Ministry of Finance, https://www.mof.go.jp/english/policy/budget/budget/fy2021/02.pdf
Scope Ratings AG, Japan Rating Report, March 2018
Takashi Oshio, Managing Japan’s debt and the financial risks, East Asia Forum, 5 August 2018, http://www.eastasiaforum.org/2018/08/05/managing-japans-debt-and-the-financial-risks/
Keiichiro Kobayashi, The Tenuous Myth of Japan’s Fiscal Infallibility, The Tokyo Foundation for Policy Research, 15 November 2018, http://www.tokyofoundation.org/en/articles/2018/tenuous-myth-of-fiscal-infallibility
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To what extent does research and innovation policy support technological innovations that foster the creation and introduction of new products?
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Research and innovation policy effectively supports innovations that foster the creation of new products and enhance productivity.
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Research and innovation policy largely supports innovations that foster the creation of new products and enhance productivity.
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Research and innovation policy partly supports innovations that foster the creation of new products and enhance productivity.
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Research and innovation policy has largely failed to support innovations that foster the creation of new products and enhance productivity.
Science, technology and innovation (STI) receive considerable government attention and funding. Building on the 5th Science and Technology Basic Plan (2016-2020), in which the government aimed to spend 1% of GDP on R&D to achieve a combined public-private R&D investment of 4% GDP, the government announced its 6th Science and Technology Basic Plan (2021-2025) in 2021 with a goal to invest ¥30 trillion/$261 billion between 2021 and 2025 in public R&D, cumulating to ¥120 trillion /$1.04 trillion in combined public-private investment. In addition to the expected investment of ¥90 trillion to industry, a new university fund of ¥10 trillion has been created to raise Japanese universities’ global competition and performance. There is some suggestion of the 6th Plan aiming to incorporate humanities and social sciences in the National STI policy.
The government and outside observers, pointing to various indicators, realize that Japan’s strong position among the world’s top technology nations is on the decline. As a recent government report pointed out, Japan’s international strength in quality and quantity of scientific output has weakened over the last 20 years. The lack of progress in university reforms and government’s stalled public investments in R&D are blamed for the country’s anemic industry-academia partnership development.
Citations:
Council for Science, Technology and Innovation/Cabinet Office, Report on the 5th Science and Technology Basic Plan, 18 December 2015
Takahiro Ueyama, Japan’s 6th Science, Technology and Innovation Basic Plan, Open Access Government, September 21, 2021. https://www.openaccessgovernment.org/japans-6th-science-technology-and-innovation-basic-plan/120486/
Outline of the Fifth Science and Technology Basic Plan, http://www.dst.tokyo/docs/5th-STBP.pdf
Smriti Mallapaty, Japan prepares ‘moonshot’ project to solve global problems, Nature, 09 April 2019, https://www.nature.com/articles/d41586-019-01094-w
The government and outside observers, pointing to various indicators, realize that Japan’s strong position among the world’s top technology nations is on the decline. As a recent government report pointed out, Japan’s international strength in quality and quantity of scientific output has weakened over the last 20 years. The lack of progress in university reforms and government’s stalled public investments in R&D are blamed for the country’s anemic industry-academia partnership development.
Citations:
Council for Science, Technology and Innovation/Cabinet Office, Report on the 5th Science and Technology Basic Plan, 18 December 2015
Takahiro Ueyama, Japan’s 6th Science, Technology and Innovation Basic Plan, Open Access Government, September 21, 2021. https://www.openaccessgovernment.org/japans-6th-science-technology-and-innovation-basic-plan/120486/
Outline of the Fifth Science and Technology Basic Plan, http://www.dst.tokyo/docs/5th-STBP.pdf
Smriti Mallapaty, Japan prepares ‘moonshot’ project to solve global problems, Nature, 09 April 2019, https://www.nature.com/articles/d41586-019-01094-w
Graph View
To what extent does the government actively contribute to the effective regulation and supervision of the international financial architecture?
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The government (pro-)actively promotes the regulation and supervision of financial markets. It demonstrates initiative and responsibility in such endeavors and often acts as an international agenda-setter.
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The government contributes to improving the regulation and supervision of financial markets. In some cases, it demonstrates initiative and responsibility in such endeavors.
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The government rarely contributes to improving the regulation and supervision of financial markets. It seldom demonstrates initiative or responsibility in such endeavors.
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The government does not contribute to improving the regulation and supervision of financial markets.
Developing initiatives for the reform of the global financial architecture has not been a high-priority issue for Japan. The 2019 G-20 summit in Osaka led to the creation of Task Force 2 (TF2) which is tasked to review the T20’s aspirations and achievements during the past decades and to propose ways to promote an international financial architecture for stability and development. However, since then, there has been very little discussion or follow up on TF2 activities or Japan’s role in relation to the reform of the global financial architecture.
On the regional and plurilateral levels, Japan’s influence has been somewhat eclipsed by China, as China is heavily involved in creating a number of new international financial institutions such as the BRICS New Development Bank, the BRICS Reserve Contingent Arrangement and the Asian Infrastructure Investment Bank (AIIB). Japan has, for now, chosen not to join these institutions. Still, Japan developed its own Partnership for Quality Infrastructure in the mid-2010s, has started to work with its partners in the Quadrilateral Security Dialogue (Quad), the United States, Australia and India, on infrastructure investment in the Indo-Pacific, and pushed the passage of the G-20 Principles for Quality Infrastructure Investment in Osaka.
On balance, Japan is more of a follower than a leader with regard to global and regional (financial) initiatives.
Citations:
Task Force 2: International Financial Architecture for Stability and Development/Crypto-assets and Fintech, T20, https://t20japan.org/task-forces/international-financial-architecture-stability-development-crypto-assets-fintech/
LDP executive says Japan needs to soon join the AIIB, The Asahi Shimbun, 16 May 2017, http://www.asahi.com/ajw/articles/AJ201705160020.html
Werner Pascha, The new dynamics of multilateral cooperation mechanisms in East Asia – China’s Belt and Road Initiative, the Asian Infrastructure Investment Bank, and Japan’s Partnership for Quality Infrastructure, in: Yuan Li and Markus Taube (Eds.) How China’s Silk Road Initiative is Changing the Global Economic Landscape, London and New York: Routledge 2020
On the regional and plurilateral levels, Japan’s influence has been somewhat eclipsed by China, as China is heavily involved in creating a number of new international financial institutions such as the BRICS New Development Bank, the BRICS Reserve Contingent Arrangement and the Asian Infrastructure Investment Bank (AIIB). Japan has, for now, chosen not to join these institutions. Still, Japan developed its own Partnership for Quality Infrastructure in the mid-2010s, has started to work with its partners in the Quadrilateral Security Dialogue (Quad), the United States, Australia and India, on infrastructure investment in the Indo-Pacific, and pushed the passage of the G-20 Principles for Quality Infrastructure Investment in Osaka.
On balance, Japan is more of a follower than a leader with regard to global and regional (financial) initiatives.
Citations:
Task Force 2: International Financial Architecture for Stability and Development/Crypto-assets and Fintech, T20, https://t20japan.org/task-forces/international-financial-architecture-stability-development-crypto-assets-fintech/
LDP executive says Japan needs to soon join the AIIB, The Asahi Shimbun, 16 May 2017, http://www.asahi.com/ajw/articles/AJ201705160020.html
Werner Pascha, The new dynamics of multilateral cooperation mechanisms in East Asia – China’s Belt and Road Initiative, the Asian Infrastructure Investment Bank, and Japan’s Partnership for Quality Infrastructure, in: Yuan Li and Markus Taube (Eds.) How China’s Silk Road Initiative is Changing the Global Economic Landscape, London and New York: Routledge 2020