Japan Echo Web

A Growth Strategy for a Nation Running Out of Time

On June 18 the cabinet of Kan Naoto, Japan’s new prime minister, approved a growth strategy for “a strong economy, robust public finances, and a strong social security system.” Kan’s Democratic Party of Japan suffered an embarrassing setback in the July 11 House of Councillors election, when it was unable to garner a majority of the upper house seats, but his administration remains determined to incorporate the strategy’s policy measures, including a cut in the corporate tax rate to strengthen the competitiveness of Japan-based companies, in the budget for fiscal 2011 (April 2011 to March 2012). The hope is to rescue the nation’s economy and society from the two decades of stagnation that have followed the bubble boom in the second half of the 1980s. Through the combined efforts of the public and private sectors, the administration seeks to realize an average 3% nominal growth rate and 2% real growth rate over the period through fiscal 2020. The target is the construction of a new Japan that will develop together with the rest of Asia, strengthening its economic collaboration with other Asian nations.

Kan’s growth strategy is a fleshed-out version of the new growth strategy adopted in December 2009 by the administration of his predecessor, Prime Minister Hatoyama Yukio. Setting targets in seven strategic areas and specifying 21 national strategic projects deemed likely to make a major contribution to economic growth, the authorities propose to use these areas and projects to provide Japan with a revitalized economy for the twenty-first century.

The following are the seven strategic areas of the new growth strategy: (1) strategy for becoming an environment and energy power through “green innovation” (create over ¥50 trillion in new environment-related markets and 1.4 million new environment-sector jobs), (2) health power strategy for “life innovation” (foster industries to meet the demand for medical care, nursing care, and other health-related services, creating ¥50 trillion in new markets and 2.8 million new jobs), (3) strategy for establishing the FTAAP, the Free Trade Area of the Asia-Pacific, (4) strategies for promoting a tourism-oriented nation and local revitalization, (5) strategy for making Japan a leading science and technology power with first-rate information technology (increase total public and private R&D investment to over 4% of gross domestic product), (6) employment and human resources strategies, and (7) financial strategies (supply growth capital and secure a position for Japan as a main market and top player in Asian finance).

Among the 21 national strategic projects, the following are representative examples: (1) expand the supply of renewable energy, (2) build ecological “future cities” (and export the know-how for creating them), (3) revitalize forests and forestry, (4) expand high-level medical care and make it widely available, (5) establish an international position as a provider of medical care (increase the entry of foreign patients, introducing a system of medical-care visas), (6) secure a position as a major player in the global infrastructure business, (7) reduce the effective corporate tax rate and make Japan an Asian industrial center, (8) foster global human resources and expand the acceptance of highly skilled foreign personnel, (9) implement a strategy for intellectual property and promote “cool Japan” overseas, (10) strengthen economic partnerships through the FTAAP, (11) introduce a system of “comprehensive special zones,” (12) promote R&D investment, (13) establish an integrated exchange handling securities, financing, and commodities (with the aim of creating a major financial center drawing in funds from the world and investing especially in Asia), and (14) double the size of the existing housing and remodeling markets.