Japan Brief/FPCJ, No. 0980
January 5, 2010


Japanese Government Aims for 3% Annual Growth up to FY 2020

The basic policy for a new growth strategy announced by the Japanese government on December 30 envisages an average annual gross domestic product (GDP) growth of 3% in nominal terms and 2% in real terms in the period up to fiscal 2020. To achieve this goal, the basic policy selected six key sectors as strategic fields: (1) environment and energy, (2) health service, (3) Asia, (4) tourism and community revitalization, (5) science and technology, and (6) employment and human resources buildup.

If the growth strategy programs materialize, the government says, Japan’s nominal GDP will rise to around 650 trillion yen (compared with the current fiscal year’s estimated 473 trillion yen). By normal standards in the past, it is unusual for the nominal growth target to take precedence over the real growth target, but this is evidence of the government’s concern over persistent deflation, which the Bank of Japan predicts will prevail up to 2011.

Among the six strategic fields, particular emphasis is being placed on the environment and energy sector, where the government expects that more than 50 trillion yen in new demand and 1.4 million new jobs will be created centering on promotion of the use of renewable energy, such as solar power. In the health sector some 45 trillion yen in demand and 2.8 million jobs will be added by boosting the medical, nursing, and health-related service industries. In the tourism sector, the aim is to triple the number of foreign visitors to Japan to 25 million persons annually, with the creation of 560,000 jobs.

As for the Asian markets, Prime Minister Yukio Hatoyama told a press conference following the announcement of the basic policy that Japan would work toward the completion of a “Free Trade Area of the Asia-Pacific” (FTAAP) by 2020, together with the promotion of domestic reform geared to harnessing Asia’s fast growth.

The strategic plan foresees the unemployment rate, which currently stands at the 5%-plus level, coming down to the 3% range over the midterm (in other words, in the coming four years).

According to major newspapers, the government apparently felt compelled to announce the basic policy in a hasty manner before the year ended in response to mounting criticism that a longer-term strategy to put the nation’s economy on a firm growth track is distinctly absent from its policy. Deputy Prime Minister Naoto Kan, concurrently minister in charge of national policy, who announced the plan alongside the prime minister, declared that “This growth strategy plan means the Hatoyama government is turning to the offensive. We’ll take one preemptive step after another [in the new year]” (the Asahi Shimbun, December 31).

In announcing the new strategic plan, Prime Minister Hatoyama stressed that “It must be that the economy works for the people, not the other way around. We will change the past idea that was biased toward encouraging the supply side and firmly generate demand.” Thus, he made it clear that his government’s economic policy is certain to give priority to the demand side (consumers) over the supply side (companies)(the Asahi Shimbun, December 31). Prime Minister Hatoyama called his government’s policy to generate demand the “third way,” as opposed to reliance on public works projects and fiscal money (the first way) and excessive emphasis on the market principle (the second way). At the press conference Prime Minister Hatoyama said, “Plans are nothing but pie in the sky if they are not carried out. We will push them through by all means.”

While the targets may look ambitious, observers say that concrete steps to achieve them appear to be lagging. According to the government, a detailed “road map” with concrete policy measures is to be crafted by June.

Major Newspaper Editorials

On December 31 The Nikkei pointed out that the basic policy lacks the point of view that it is corporations that create profits and wealth for distribution among households and consumers. Its editorial on that day gave a certain rating to the fact that the Hatoyama administration had drafted its first mid- and long-term economic strategy clarifying priority fields and goals. However, it argued, “It is private-sector investment that provides the driving force for sustainable growth and the creation of jobs. Although the government says an official ‘road map’ will be presented in June, budgetary appropriations, tax policy, deregulation, and reform must be fleshed out by that time so that an environment to encourage private investment is in place.”

Other newspapers made an issue of the insufficient fight against the deflation that is plaguing the Japanese economy. The Yomiuri Shimbun in its December 31 editorial, titled “Government’s new growth strategy short on details,” asserted that “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 editorial also said that “the government has cut spending on 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.”

The Sankei Shimbun in its December 31 editorial also criticized the government’s growth strategy for the “absence of a goal to move out of deflation, which is a crucial thing.” It went on, “If the goal for combating deflation is not shown, the mid- and long-term growth strategy is meaningless.” The Sankei also said, “It is problematical that the growth strategy focuses on the demand side under the name of ‘priority for consumers’ and neglects support for business corporations.”

(Copyright 2010 Foreign Press Center, Japan)

*Japan Brief is an original production of the Foreign Press Center, Japan, and does not represent the views of the Government of Japan or of any other body.


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