Post-Abenomics reforms

Prime Minister Shinzo Abe dissolved the Lower House on Nov. 21 and set the general election for Dec. 14. He characterized the snap election as an election to seek peoples fresh mandate for Abenomics his set of policies designed for national economic recovery.

Abenomics has achieved some results in the financial, stock market and monetary fields. But its real effects on the real economy such as workers wages and equipment investment are still unknown. In this sense, Abenomics is headed for a crucial stage involving the question of how much it can carry out the nations pressing structural reforms.

The first and foremost structural problem Japan needs to solve concerns its population structure. According to the National Institute of Population and Social Security Research, Japans population, which stood at 128.05 million in 2010, will fall to 86.74 million in 2060 and 49.59 million in 2100.

Its population is projected to decline in the 21st century by the same margin as its population grew in the 20th century. Only recently, the government has set forth countermeasures including an increase in the number of child care facilities. But the question is how to address such problems as the tendency among people of marriageable age to stay unmarried temporarily or permanently, the growing trend of late marriage and the decline in the average number of births for married couples.

Furthermore, the problem of the aging population in Japan will increase the costs of its social security system unless it is reformed. This in turn will exert strong pressure on its already worsening financial situation and declining productive-age population.

In the second place, there is the need to increase Japans rate of economic growth in other words, its capacity for innovations and market charm. The Organization for Economic Cooperation and Development forecasts that the annual average real economic growth for the 2010-2030 period will register 3.3 percent for the world and 2.3 percent for OECD member nations.

But the rate for Japan will be 1.1 percent lower than 2.5 percent for the United States, 1.6 percent for the European Union, 5.4 percent for China and 5.8 percent for India.

During Japans deflationary period after the burst of its asset-inflation economic bubbles, Japanese industries moved many of their production functions to foreign countries, causing the nations industrial competitiveness to decline. As a result, its current system is not capable of increasing exports even if the yens value declines. As for household electrical appliances for which Japan once boasted high competitiveness, half the demand has been filled by imports in recent years.

As for the amount of direct income investments relative to gross domestic product, Japan ranks lower than Taiwan, South Korea and China, to say nothing of advanced countries. This country must strive harder to raise the innovative power of its industries and improve the charm of its markets.

Third, it is necessary for the nation to raise the power of its human resources. Education is the basis for raising human potential and quality and the source for promoting innovations. But whereas Japans elementary and secondary education ranks high in international comparison, the ratings for its undergraduate and postgraduate university education are low.

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Post-Abenomics reforms