Govt's new growth strategy short on details
Having an ambitious goal alone is not enough to ensure a bright future. The government's newly unveiled growth strategy for a "shining Japan" lacks vital substance in that it fails to illuminate how to achieve these goals in detail.
The strategy, the basic policy of which was approved by the Cabinet on Wednesday, sets a target of achieving a more than 2 percent annual growth in the gross domestic product in real terms through fiscal 2020. In nominal terms, the growth target is aimed at staying above 3 percent.
This means that in 10 years, the nominal GDP is expected to grow from the 470 trillion yen of this fiscal year to 650 trillion yen. But the fact is that the nominal GDP has been in negative territory for the past six straight quarters, pushing GDP down by 50 trillion yen. As the economy has entered a deflationary phase, which also shrinks the GDP, obstacles to reaching the target are extremely high.
Solid ends, vague means
In its growth strategy, the government declared it would pursue a "third way" of seeking the creation of new demand, instead of relying on public works projects or following the principle of market fundamentalism as seen under the administration of former Prime Minister Junichiro Koizumi. The new stance touted by the administration of Prime Minister Yukio Hatoyama appears to be in line with a policy pledge to "shift from concrete to human beings," meaning a departure from an industrial structure heavily dependent on public works projects.
The strategy listed two areas--the environment and energy, and medical and nursing care services--that the government intends to focus on and shore up. In these areas, which Japan can boast of having strengths in, there will be a goal of creating new demand worth 100 trillion yen and 4.2 new million jobs.
The government also intends to stimulate trade with other Asian nations--whose economies are continuing to grow fast--support scientific and technological development and strengthen measures to sustain employment.
There is nothing wrong with the direction of these policy courses. But, in terms of details in the measures, we find little difference with those included in about a dozen growth strategies hammered out by the governments of the past decade.
This is likely because the strategy was compiled from worn-out proposals submitted by ministries and agencies concerned. As it took only half a month to devise the strategy, it gives an impression that the government threw it together in order to thwart criticism that the current administration has no growth strategy.
Get private sector input
The government intends, by June, to complete the growth strategy by putting flesh on these basic policy bones and provide a road map for achieving these goals.
But it would be better to drastically review the strategy by, for example, inviting ideas widely from the private sector and narrowing down the list of measures to those that appear to have the greatest potential effect and feasibility. There also should be mention of how necessary funds for nurturing new industries and supporting technological development should be allocated.
If the Hatoyama administration sticks to its policy pledge not to raise the consumption tax rate for four years, it is unlikely that it will be able to secure a stable revenue source to implement policy measures. It must not have faith in a "rising tide" theory of economic growth being able to increase tax revenues.
It also is necessary to show the path to fiscal reconstruction for the mid- to long-run in order to ease people's anxiety about the future of social security and other matters.
Unless measures are taken to prevent a further economic decline and solve the deflation problem, any great growth strategy will merely end up being pie in the sky.
The government has cut spending for public works projects by nearly 20 percent in the fiscal 2010 budget, compared with the current fiscal year. Spending for urgently needed projects such as construction work to improve the earthquake resistance of primary and middle school buildings also has been reduced. These projects should be revived and used to help economic recovery.
(From The Yomiuri Shimbun, Dec. 31, 2009)