Japan Press Weekly

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2020 April 22 - May 12 [ECONOMY]

Economist: Financial crisis triggered by COVID-19 pandemic highlights vulnerability of Japanese economy

Fujita Minoru, economics professor at J. F. Oberlin University, in an Akahata interview criticized the Abe government’s economic policy for putting too much emphasis on the promotion of international competitiveness. Fujita said that Abe’s policy made the Japanese economy vulnerable to emergencies like the ongoing COVID-19 pandemic and urged that industrial policies should focus on people’s livelihoods.

The following are excerpts of Fujita’s interview which appeared in the April 23 issue of Akahata:

Prime Minister Abe Shinzo’s economic policy, dubbed “Abenomics”, has attempted to put the Japanese economy on a growth track by increasing large businesses’ international competitiveness. In line with this strategy, the Abe government reduced corporate tax rates, relaxed regulations in a wide range of fields, promoted what it describes as “flexible and diverse working styles”, and drastically cut government social security spending.

Abenomics, however, has not worked. Although the total amount of pretax profit of all industries increased from 48 trillion yen in 2012 to 84 trillion yen in 2018, the growth of domestic capital investment and workers’ wages is far from impressive. There is not much to be seen in the field of the creation of new jobs and new industries. A large number of small- and medium-sized enterprises go bankrupt every year. The population continues to flow out of rural areas to urban centers.

It is now clear that the policy of focusing on promoting international competitiveness contributes little to the recovery or growth of the domestic economy.

The ongoing coronavirus crisis has laid bare the vulnerability of industrial structures aimed at boosting competitiveness in international markets. The current coronavirus crisis has forced large corporations to suspend their business activities at home and abroad which has adversely affected their sales. It is certain that Japan’s GDP will suffer a large negative impact.

Many lessons can be learned from the COVID-19 crisis. In any country that is overly dependent on international markets, its domestic economy will suffer a severe blow once a global economic crisis emerges. Meanwhile, it has become clear that industries pertaining to people's lives and livelihoods such as agriculture, manufacturing, healthcare, wholesale and retail businesses, i.e., domestic demand-oriented industries are extremely important. Only when these industries are given priority can Japan overcome the coronavirus crisis. The government should promote these industries which have much to do with people’s health and livelihoods as a main focus in its economic policy.