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Japan Specialist Seminars

Specialist Seminars

The direction of the Japanese economy in the post corona era's Details
Theme The direction of the Japanese economy in the post corona era
Presenter Song, Jeong-hyun (Dongguk Univeristy)
Time Oct. 13, 2020 (Tue.) 12:30 - 14:00
Venue Zoom Webinar
No. 242
Discussion
On October 13, 2020, the 242nd Japanese Expert Invitation Seminar was held as a webinar. About 30 participants using Zoom attended, and Professor Song Jeong-Hyun of the Department of Japanese Studies at Dongguk University gave a presentation on the theme of “The Direction of Japanese Economy in the Post Corona Era”.

Due to the corona pandemic, the economy of non-manufacturing industries such as automobiles, steel, shipbuilding and tourism-related accommodation, food services and personal services, which are export-oriented manufacturing industries, deteriorated. The Japan Economic Research Center predicted that even if Japan corrected Corona 19 at an early stage, it would show negative growth of -6.8%, and the IMF also predicted a growth of -5.2%. However, the darker outlook is that even after the coronavirus is corrected, the Japanese economy is predicted to enter negative growth after 2032 due to continued population decline, and the corona 19 crisis is expected to worsen this trend.
This needs to be examined in connection with Abenomics' policy performance. The second Abe regime promoted economic stimulus based on the "three arrows" of bold financial policy, agile fiscal policy, and promotion of private investment, but data demonstrates that there was no significant GDP growth as of 7 years later. Although the government's expenditure has increased significantly, it can be demonstrated from data that private, corporate, and household incomes have not increased as much. In 2020, the Japanese government is relying on government bonds for 45.4% of its revenues, and the amount to recover government bonds amounts to 18.3% of all expenditures. This is the government's persistent fiscal rigidity, and it means that the budget for stimulating the economy or building a social safety net is being used only to maintain government bonds.
Japan's national debt already exceeded 200% of its GDP in 2009, before Abenomics, and this figure continues to deteriorate due to Abenomics' expanded fiscal policy and the recovery of the Great East Japan Earthquake. As a result, it is predicted that the national debt will reach 270% of GDP by 2020, at 237% of GDP, and if this level of expenditure continues by 2035. On the other hand, the government's debt structure has not improved and is continuously accumulating, and the Japanese government's 50 trillion yen extra in response to the Corona 19 incident was also issued as government bonds.
In this situation, Prime Minister Suga, who came to power, is also expected to take immediate action against the corona crisis and rapid outcomes rather than macroscopic structural reform. However, the expansion of the short-term supplementary budget is expected to intensify the problem of fiscal soundness, and in the medium to long term, it is unlikely that the export industry will recover from the global economic downturn or the tourism industry will recover from foreign visitors and create added value. The task of the Japanese government will be to examine fiscal soundness along with the development of new high-value-added industries of Untact and the Fourth Industrial Revolution, which has great implications for Korea, which has a similar economic structure.

After the presentation, questions and answers followed. The most interesting part was the safety of Japanese government bonds. In response to a number of questions, the presenter said, "The security of Japanese government bonds is guaranteed," but the possibility of private debt recovery, too high a share of expenditures on government bonds, and the resulting reduction in government spending and fiscal rigidity in other sectors in the long run It was evaluated as a risk factor. Responding to the question asking for evaluation of Abenomics, the presenter criticized Abenomics' most important policy goal, for the fact that household real income did not rise, and predicted that the corona crisis would further highlight this point. In addition, questions about the aftermath of the failure to host the Olympics, countermeasures for the tourism industry that has been hit, the digital currency problem, and predictions about Suganomics followed, and the seminar for about an hour and a half was ended.
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