POLICY PROPOSAL

The Fourth Industrial Revolution in Japan(5/Sep/17) New!

Japan's Non-Manufacturing Sector Must Seek to Utilize AI & IoT Technologies
-- Breaking Away from Existing Operations is Crucial


Japan stands on the brink of a Fourth Industrial Revolution, calling for a drastic improvement in productivity, while seeking to leverage effective technologies including artificial intelligence (AI) and the Internet of Things (IoT), which connect everything to the Internet. It should be noted, however, that the mere introduction of AI and IoT technologies by simply following the fashionable trend in business would probably result in decreased productivity, contrary to expectations.
What is the recipe for success in achieving higher productivity by introducing AI and IoT technologies? In this article, we would like to present our industrial analysis and our independent research results regarding businesses in Japan, based on discussions held at a related study group led by the Japan Center for Economic Research (JCER).

"Japan's Non-Manufacturing Sector Must Seek to Utilize AI & IoT Technologies"

Vision 2050

Public Financial Burden of the Fukushima Nuclear Accident(7/Mar/17)

Accident Cleanup Costs May Rise to 50-70 Trillion Yen
--It’s Time to Examine legal liquidation of TEPCO
--Higher Transparency is Needed for the Reasons to Maintaining Nuclear Power


In December 20 2016, the Committee for Reforming Tokyo Electric Power Co (TEPCO) and Overcoming 1F Challenges (TEPCO Committee) at the Ministry of Economy, Trade and Industry announced that new calculations indicated that the cost of the cleanup of the accident at the Fukushima Daiichi Nuclear Power Plant would increase up to 22 trillion yen from previous estimate of 11 trillion yen, and that the government’s course of action would be to put a surcharge on electricity tariffs. However, JCER calculations suggest that the final cleanup cost could swell to nearly 70 trillion yen. To retain nuclear power in a situation where there is no shortage of power and when nuclear power does not seem to be the cheapest source of energy necessitates a change in the skeptical attitudes of more than half the nation. As a prerequisite for the public financial burden, clarifying the responsibility of the stakeholder organizations including the legal liquidation of TEPCO, a higher degree of transparency around the importance of nuclear power as a source of energy, and responsible countermeasures to severe accidents are vital. The government’s current goal is to supply around 22% of power through nuclear energy by FY2030, but unless trust is won back, the chances are high that it will end in a fiasco.

"Accident Cleanup Costs May Rise to 50-70 Trillion Yen"

Building an ICT-driven economy & society (27/JUL/16)

Potential of Investments in Information and Communications Technology
--GDP Boost of 70 Trillion Yen by Fiscal Year 2030
--Using ICT for Interaction with Customers Is Key


The downturn in potential GDP growth of Japan’s economy has long been pointed out. Now facing a time when the burdens of the declining population and aging society weigh heavily, it is an urgent matter to increase the growth of labor productivity. Given the situation, how should companies effectively use rapidly evolving information and communications technology (ICT)? How should the government back them up? This report will discuss these issues based on deliberations held by a research group in which the authors participated, launched by the Japan Center for Economic Research (JCER) aimed at building an ICT-driven economy and society.

"Potential of Investments in Information and Communications Technology"

Roadmap for Financial Reform (27/APR/16)

Time schedule for tax and social security reform should be prepared within two years
--Maintain fiscal discipline by establishing an independent institution
--Implement drastic reform to accelerate growth


JCER forecasts that the Japanese economy will be sluggish in FY2016 due to the slowing down of the global economy, particularly in emerging nations, and the strong local earthquake that struck the Kumamoto Region in Kyushu. The government is scheduled to increase the consumption tax rate to 10% in April 2017, but this may be postponed. The consumption tax hike to 10% is essentially unavoidable to address the current issues, including the low birthrate, aging population and the repayment of massive public debt. If the tax hike is postponed every time the economic situation worsens, trust will be lost in the finances of Japan and the risk of financial failure may increase. In order to draw a path to fiscal consolidation while paying attention to the economy, we propose to establish a Fiscal Evaluation Council that presents economic and financial prospects independently from the government, and sets goals for fiscal consolidation, including social security reform.

"Roadmap for Financial Reform"

 Please follow this link for access to the original report in Japanese.

The Future of Energy and Environmental Choice
Fiscal 2014 Report (26/MAR/15)

60% Reduction in CO2 Emissions by 2050 Relative to 2005 is Achievable
--30% reduction ? matching U.S. Target ? by 2030
--Japan must lead international debate on the prevention of global warming


At the 21st Session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP21) at the end of 2015, specific greenhouse gas (GHG) emissions reduction targets for 2030 will be determined. Japan is also expected to finalize plans for reductions by the summer. We estimated the extent of possible reductions and the scale of costs and benefits from fiscal 2012 to fiscal 2050 that would result from the use of renewable energy sources, nuclear power and carbon capture and storage (CCS). A reduction target matching that of the United States is achievable and to secure a leading role in the international debate on prevention of global warming, Japan must set itself a target of a 30% reduction in emissions by fiscal 2030. In the meantime, to achieve further reductions by 2050, examination of emissions regulations and carbon pricing cannot be avoided.

"Fiscal 2014 Report"

The Future of Energy and Environmental Choice
Energy and Power Saving after the Nuclear Accident (18/NOV/14)

Energy Consumption Down 40% in Fiscal 2050 by Economic Structural Changes
  --Energy Conservation Is a Growth Engine


Since the Fukushima Daiichi Nuclear Power Plant accident in March 2011, there have been growing concerns over power shortages and increases in electricity costs. While industrial circles call for the “restart of nuclear power plants” as a measure to avoid electricity rate hikes, they are also, at the same time, making steady efforts to conserve energy and power. The business performance of Japanese companies is rapidly recovering due to the combined effects of the measures to stem the yen’s appreciation. This paper examines whether energy and power conservation will be a hindrance to growth.

"Energy and Power Saving after the Nuclear Accident"

JCER Long-Term Forecast and Policy Proposal (Updated 8/APR/14)

Maintain Position as a First-tier Nation
  --World Economic Map in 2050
  --Establish National Targets to Stabilize Population Decline


This is an integrated report of our long-term forecast and policy proposal project commemorating 50th anniversary of our foundation. It contains two analyses. One is “World Economic Map in 2050” which we drew based on our long-term forecast. We predicted a possible slowing in the Chinese economy, which lacks some of essential institutional properties sustaining economic growth, such as political stability and economic liberalization to promote creative destruction while it stays under the current political regime. The other is our appeal that Japan should establish national targets to halt its population decline to remain as “A First-tier Nation” still in the future. We propose to expand family allowances especially for those who raise second and third children by following France’s example which has succeeded in improving both fertility rates and female labor participation.
(The world long-term forecast has been revised and updated from the previous version released in Dec 2013 to include data for 2012.)

"Maintain Position as a First-tier Nation" (Updated 8/APR/2014)
Summary of Forecast (Members Only)

JCER Long-Term World Forecast - Three Scenarios(31/MAY/13)

Three Barriers on the Road to Prosperity


Population demographics, energy and government debt are among the structural problems which Japan must overcome in the coming decades. We have worked out an independent long-term forecast for Japan through 2050 with a view to considering what steps the nation must take to maintain vitality into the future.
(This is translation from the article appeared in the Nihon Keizai Shimbun.)

"JCER Long-Term World Forecast - Three Scenarios (Summary)"

Global Financial Framework to Ensure Growth(11/APR/13)

Stabilize Foreign Exchange Rates to Counter a Sovereign Debt Crisis
  --Currency reform to end the deflationary economy


The Japan's growth strategies are not limited to domestic reform. The global financial framework is considered to be a substantial foundation on which the economy develops. A key reason why Japan has been suffering from a deflationary economy is the excessive appreciation of the yen. For this reason, building a framework that eliminates factors making the yen overvalued and one that can manage a future financial crisis will be an effective growth strategy. In addition to aiming to end Japan's deflationary economy and stimulate medium- to long-term growth, the Japanese government should facilitate the reform of the global currency system primarily by adopting measures to stabilize the foreign exchange market so that it will be able to handle sovereign debt and other crises, and strengthening the International Monetary Fund (IMF).

"Global Financial Framework to Ensure Growth"

Problems and Solutions(08/MAR/13)

Ensuring that Japan Remains an Economic Powerhouse
  --Female Labor Participation Key to Building World-Class Workforce


The Japanese economy remains mired in a slump now known as the "lost two decades". Japan was once said to have "second-rate politics but a first-rate economy". However if present trends continue, the economy could also sink to second-rate status-or worse. What lies ahead is not just a mild decline. Our 39th Medium Term Forecast for the Japanese Economy warns that the burden on government finances from the rapid aging Japanese society and the world's largest public debt could ultimately lead to an economic collapse.

"Problems and Solutions"

Redesigning of the Japanese Economy: Beyond the Earthquake Disaster

Policy Proposal To Ward Off Economic Recession And Stem Yen's Ascent(09/OCT/12)

Risks to be forestalled to smoothly raise consumption tax


The economic situation warrants no optimism on its future course. The ruling and major opposition parties, which have finished their presidential elections, are turning attention to the Diet dissolution and a snap election rather than policies. The political stalemate could facilitate an economic downturn, possibly unraveling the scenario to restore fiscal health, including a consumption tax increase. Japan Center for Economic Research (JCER) makes urgent policy proposals to contain the immediate risk of economic recession while aiming for strategic fiscal management over the medium term. Ahead of the 2012 Annual Meetings of the International Monetary Fund and the World Bank Group to be started in Tokyo on Oct. 9, we also propose frameworks which will help arrest the yen's appreciation and stabilize the financial system.

Kazumasa Iwata,President
"Risks to be forestalled to smoothly raise consumption tax"

Redesigning of the Japanese Economy: Beyond the Earthquake Disaster

Looking at Abandoning Nuclear Energy by the 2030s(06/NOV/12)

Top Priorities: Address Spent Nuclear Fuel and Surplus Plutonium Issues.
  Use of Nuclear Energy through 2050 Should Remain On Table. New!


As energy policy shapes up to become a major point of contention in the next general elections, the government has changed course in favor of abandoning nuclear energy. The Energy and Environment Council on September 14 worked out an "Innovative Strategy for Energy and the Environment", the central pillars of which are to abandon reliance on nuclear power plants within the 2030s, promote energy conservation and rapidly expand use of renewable energy. The plan outlines six issues to be addressed if these pillars are to be realized.

"Looking at Abandoning Nuclear Energy by the 2030s"

Policy Proposal To Ward Off Economic Recession And Stem Yen's Ascent(09/OCT/12)

Risks to be forestalled to smoothly raise consumption tax


The economic situation warrants no optimism on its future course. The ruling and major opposition parties, which have finished their presidential elections, are turning attention to the Diet dissolution and a snap election rather than policies. The political stalemate could facilitate an economic downturn, possibly unraveling the scenario to restore fiscal health, including a consumption tax increase. Japan Center for Economic Research (JCER) makes urgent policy proposals to contain the immediate risk of economic recession while aiming for strategic fiscal management over the medium term. Ahead of the 2012 Annual Meetings of the International Monetary Fund and the World Bank Group to be started in Tokyo on Oct. 9, we also propose frameworks which will help arrest the yen's appreciation and stabilize the financial system.

Kazumasa Iwata,President
"Risks to be forestalled to smoothly raise consumption tax"

Redesigning of the Japanese Economy: Beyond the Earthquake Disaster

Looking at Retaining Nuclear Power Plants (28/AUG/12)

Retaining Nuclear Plants after 2030: Four Conditions


At the end of June 2012, the government´s Energy and Environment Council announced three options relating to Japan´s reliance on nuclear power plants through 2030 (see Reference Table, last page). The government plans to select one of these options as early as August. We have estimated the economic impact of costs relating to the Fukushima Daiichi accident which followed the March, 2011 Great East Japan Earthquake, including cleanup costs and insurance and other expenses necessary to provide against the risk of future accidents. Based on these estimates, we have in the present report highlighted those points which we believe are essential to consider if Japan relies on nuclear power plants to supply a certain portion of its electric power needs through 2030 and after. A major premise underlying our proposals is that the causes of the Fukushima Daiichi accident must be clarified and new physical and procedural safety standards established by 2030.

"Retaining Nuclear Plants after 2030: Four Conditions"

Looking at the Issue of Abandoning Nuclear Energy (30/JAN/12)

Energy Saving and Renewable Energy Development Less Costly than Sticking with Nuclear Energy
  --Nuclear Generation Could Cost Twice Government Estimates


In our 38th Medium Term Forecast for the Japanese Economy released in early December , we considered and compared the cost of cleaning up the accident at the Fukushima Daiichi nuclear power station and continuing with nuclear power, against the cost of abandoning nuclear power by FY2050 (April, 2050-March, 2051), relying on solar and wind power to the extent that power transmission network upgrades are not required. We concluded that there was no distinct difference between the two. Taking the above forecast a step further, the present report estimates the cost of abandoning nuclear power by FY2050, relying on further energy conservation efforts as well as more widespread use of new forms of energy, including solar, wind, thermal, biomass and low head hydropower. We find that making efforts in both adopting new forms of energy and energy saving would likely be cheaper and more economically advantageous than continuing with nuclear power.

Tatsuo Kobayashi, Senior Economist
"Energy Saving and Renewable Energy Development Less Costly than Sticking with Nuclear Energy"

Influence of the electricity shortage on Japanese regions and industries (20/OCT/11)

Structural Change in Industry to Ease Downside of Power Shortage
  --Avert Current Account Deficit by Shifting Resources to Machinery Industry


All nuclear power stations in Japan may be forced to cease operation in the wake of the disastrous accident at the Fukushima Daiichi nuclear power plant. We have used the JCER regional computable general equilibrium (CGE) model to estimate the impact of the electricity shortage over the medium to long term. Power shortages resulting from the shutdown of nuclear power stations and higher power costs associated with the substitution of thermal power generation are delivering shocks to the economy, but industrial restructuring could reduce the margin of decline to 0.4%. If Japanese industry could be structurally altered to power it through energy-saving technology, it might be possible to avoid a decline in the production of machinery, the nation's mainstay industry.

Tatsuo Kobayashi, Senior Economist
Katsuaki Ochiai, Associate Senior Economist
Yuta Tachi, Economist
"Structural Change in Industry to Ease Downside of Power Shortage"


Tax and Pension Reform (17/MAY/11)

Pension Reform: Take 'Energizing' Approach
  --Stimulate Private Investment and Consumption
  --Scrap Premiums: Finance via Consumption Tax


Coping with the problem of an increasingly aged Japanese population requires urgent reform of the nation's tax and social security systems. There is an active debate on how to fund this reform, but effecting it by relying mainly on higher taxes carries the risk of hurting the economy, which would render it even more difficult to increase tax revenue and rebuild government finances. It is most important to leverage the vitality of the private sector via thoroughgoing reform and give working young people a reason for hope.
Kazumasa Iwata, JCER President
"Pension Reform: Take 'Energizing' Approach"



Thinking Costs of Generating Electricity(19/JUL/11)

FY2020 Nuclear Generating Cost Treble Pre-Accident Level
  --Huge Price Tag on Fukushima Accident Cleanup


Most observers now believe it will take several decades to clean up the accident at Tokyo Electric Power Company's Fukushima Daiichi nuclear power station which took place in the wake of the Great East Japan Earthquake."Impact to last Decade or more if Existing Nuclear Plants Ceasing", we estimated it would reach 5.7 to 20 trillion yen over the next ten years. Based on this estimate, we have calculated the estimated cost of electric power generation from nuclear plants. By fiscal year 2020 (April 1,2020-March 31,2021), the generation cost of 1 kilowatt hour (kWh) of electric power from nuclear plants could reach 17yen, or about three times that of pre-accident levels (5.4yen-6.4yen). These results make it difficult to argue that nuclear energy has any cost advantages over renewable forms of energy, such as wind power.

Tatsuo Kobayashi,Senior Economist

"FY2020 Nuclear Generating Cost Treble Pre-Accident Level"

Thinking of Energy Shortage (25/APR/11)

Impact to last Decade or more if Existing Nuclear Plants Shut Down
  --GDP Could Drop 2% on Power Shortages


Two months have now passed since the Great East Japan Earthquake struck. Other than the tangible and intangible wounds inflicted by the disaster, constraints on electric power supplies owing to the major accident at the Tokyo Electric Power Company (TEPCO) Fukushima Daiichi nuclear station will continue to weigh heavily on the Japanese economy. According to estimates based on our economic model, if there is a 10% electric power shortage in the Kanto region this summer and economic activity in each industry declines in proportion to its dependency on electric power, economic activity in Japan could fall by over 4% during the summer and by 2% for the year as a whole.

JCER Economic Research Department

"Impact to last Decade or more if Existing Nuclear Plants Shut Down"



Policy Proposals for the response of the Great East Japan Earthquake (17/MAR/11)

Urgent Need for 5 Trillion Yen Disaster Recovery Package


The government should act quickly to assemble a 5 trillion Yen disaster recovery package to be financed by freezing proposed government programs, including the child allowance and other programs, while imposing a temporary "reconstruction tax" from the April 2012.

JCER Economic Research Department

"Urgent Need for 5 Trillion Yen Disaster Recovery Package"







Back Number

Joint Policy Proposal with International Think Tanks(OCT/09)